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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2021

 

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

 

Commission file number 000-54296

 

 

 

AXIM Biotechnologies, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   27-4029386
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification Number)

 

6191 Cornerstone Court, E. Suite 114
San Diego, CA 92121
(Address of principal executive offices)
 
(858) 923-4422
(Registrant’s telephone number, including area code)
 
 
(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

  1  

 

Indicate by check mark whether registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐  No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.

 

Large

accelerated

Filer

Accelerated

Filer

Non-accelerated filer

(Do not check if smaller

reporting company)

Smaller

reporting

Company

Emerging

growth

Company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No

 

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 133,261,989 of common stock, par value $0.0001 per share, outstanding as of August 20, 2021. 

 

 

  2  

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

AXIM BIOTECHNOLOGIES, INC.

 

  Page
Condensed Consolidated Balance Sheet as of June 30, 2021 (unaudited) and December 31, 2020 4
   
Condensed Consolidated Statements of Operations for the three and six months periods ended June 30, 2021 and 2020 (unaudited) 5
   
Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the six months ended June 30, 2021 and 2020 (unaudited) 6
   
Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited) 7
   
Notes to Condensed Consolidated Financial Statements (unaudited). 8

  

 

  3  

 

AXIM BIOTECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2021

 

    June 30, 2021   Dec 31, 2020
    (unaudited)    
ASSETS                
                 
Current assets:                
Cash   $ 202,185     $ 457,181  
Accounts receivables     11,873           
Prepaid expenses     177,258       255,923  
Inventory     20,509           
Total current assets     411,825       713,104  
                 
Property and equipment, net of accumulated depreciation     110,932       104,094  
                 
Other Assets:                
Notes receivable- related party     103,755       103,242  
Goodwill     2,458,233       2,458,233  
Developed research in progress, net of accumulated amortization     7,158,904       7,800,000  
Security deposit     5,000       5,000  
Operating lease right-of-use asset     104,185       130,722  
Total other assets     9,830,077       10,497,197  
                 
TOTAL ASSETS   $ 10,352,834     $ 11,314,395  
                 
LIABILITIES AND STOCKHOLDERS'  DEFICIT                
                 
Current liabilities:                
Accounts payable and accrued liabilities   $ 853,210     $ 1,073,142  
Lease liability obligations (see note 15)     58,540       53,851  
Due to shareholder     180       180  
Due to first insurance funding     98,888       25,369  
Promissory note (including accrued interest of $29,234 and $19,507, respectively)(see note 7)     353,452       343,725  
Total current liabilities     1,364,270       1,496,267  
                 
Long-term liabilities:                
Deferred tax liability     2,340,000       2,340,000  
Convertible note payable (including accrued interest of $192,521 and $236,148, respectively) net of unamortized debt discount of $640,552 and $843,673, respectively(see note 10)     1,336,282       1,676,788  
Convertible note payable - related party (including accrued interest of $229,037 and $158,648, respectively)     4,229,037       4,158,648  
Lease liability obligations (see note 15)     45,645       76,871  
Total long-term liabilities     7,950,964       8,252,307  
                 
TOTAL LIABILITIES     9,315,234       9,748,574  
                 
STOCKHOLDERS'  DEFICIT                
Preferred stock, $0.0001 par value, 5,000,000 shares authorized;                
                 
Series B Convertible Preferred Stock, $0.0001 par value 500,000 shares designated, 0 and 0 shares issued and outstanding, respectively                  
Series C Convertible Preferred Stock, $0.0001 par value 500,000 shares designated, 500,000 and 500,000 shares issued and outstanding, respectively     50       50  
                 
Common stock, $0.0001 par value, 300,000,000 shares authorized 133,024,435 and 125,327,579 shares issued and outstanding, respectively     13,302       12,533  
Additional paid in capital     47,763,130       43,201,186  
Subscription receivable     (332,500 )        
Common stock to be issued     135,000       201,974  
Accumulated deficit     (46,541,382 )     (41,849,922 )
TOTAL STOCKHOLDERS'  DEFICIT     1,037,600       1,565,821  
                 
TOTAL LIABILITIES AND STOCKHOLDERS'  DEFICIT   $ 10,352,834     $ 11,314,395  

 See accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

  4  

 

AXIM BIOTECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

As of June 30, 2021

 

                 
    For the   For the   For the   For the
    Three Months Ended   Three Months Ended   Six Months Ended   Six Months Ended
    June 30, 2021   June 30, 2020   June 30, 2021   June 30, 2020
                 
Revenues     14,875                47,524           
                                 
Cost of goods sold                                    
                                 
Gross profit     14,875                47,524           
                                 
Operating Expenses:                                
                                 
Research and development expenses     48,066       121,437       149,019       126,292  
Selling, general and administrative     1,499,917       537,140       2,293,263       1,257,816  
Amortization of Other Assets     641,096                641,096           
Depreciation     6,834       4,285       13,184       5,124  
                                 
Total operating expenses from continuing operations     2,195,913       662,862       3,096,562       1,389,232  
                                 
Gain (Loss) from continuing operations     (2,181,038 )     (662,862 )     (3,049,038 )     (1,389,232 )
                                 
Other (income) expenses:                                
     Interest income     (257 )     (158 )     (513 )     (158 )
     Income from Grants from Government     (129,995 )              (219,995 )         
     Unrealized loss (gain) on marketable securities                                104,705  
     Realized loss (gain) on marketable securities              109,040                109,040  
     Amortization of note discount     181,295       22,071       203,122       41,432  
     Loss on Extinguishment of Debt     1,535,264                1,535,264           
     Interest expense     59,576       55,957       119,908       106,075  
Total other (income) expenses     1,645,883       186,910       1,637,786       361,094  
                                 
Loss before provision of income tax     (3,826,921 )     (849,772 )     (4,686,824 )     (1,750,326 )
Provision for income tax                                    
                                 
Income (loss) from continuing operations     (3,826,921 )     (849,772 )     (4,686,824 )     (1,750,326 )
                                 
Income (loss) from discontinued operations              770,383       (4,633 )     (357,430 )
                                 
NET INCOME (LOSS)     (3,826,921 )     (79,389 )     (4,691,457 )     (2,107,756 )
                                 
NET INCOME / LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS     (3,826,921 )     (79,389 )     (4,691,457 )     (2,107,756 )
                                 
Earnings per share from continuing operations                                
Basic     (0.03 )     (0.01 )     (0.04 )     (0.02 )
Diluted     (0.03 )     (0.01 )     (0.04 )     (0.02 )
                                 
Earnings per share from discontinued operations                                
Basic              0.01       0       0  
Diluted              0.01       0       0  
                                 
Earnings per share                                
Basic     (0.03 )     0       (0.04 )     (0.02 )
Diluted     (0.03 )     0       (0.04 )     (0.02 )
                                 
Weighted average common shares outstanding - basic and diluted     129,741,614       128,464,227       127,740,107       101,877,631  

See accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

  5  

 

AXIM BIOTECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statement of Stockholders' Deficit

 

                                                                                         
            Series B Convertible       Series C Convertible               Subscription        
    Common Stock       Preferred Stock       Preferred Stock       Common Stock   Additional   Amount   Accumulated    
    Shares   Amount   Shares   Amount   Shares   Amount   to be Issued   Paid In Capital   Receivable   Deficit   Total
Balance at December 31, 2019     64,854,539     $ 6,486       500,000     $ 50       500,000     $ 50     $ 50,000     $ 28,623,060     $        $ (35,440,042 )   $ (6,760,397 )
Common stock to be issued for Note receivable and True-up adjustment                                                                                         
Common stock issued against common stock to be issued received in PY     250,000       25                                       (50,000 )     49,975                           
Common stock issued for services     662,839       66                                               287,434                       287,500  
Common stock issued under registration statement on Form S-3     3,541,667       355                                               962,145                       962,500  
Subscription price adjustment                                                             (518,948 )                     (518,948 )
Beneficial conversion of 190K convertible note                                                             190,000                       190,000  
Common stock issued for acquisition     54,000,000       5,400                                               7,500,600                       7,506,000  
Net loss                                                                             (2,028,367 )     (2,028,367 )
Balance at March 31, 2020     123,309,045     $ 12,331       500,000     $ 50       500,000     $ 50     $        $ 37,094,266     $        $ (37,468,409 )   $ (361,712 )
Common stock to be issued                                                     135,000                               135,000  
Common stock issued for severance     477,025       48                                               149,952                       150,000  
Common stock issued under registration statement on Form S-3     3,953,125       395                                               547,605                       548,000  
Common stock issued per stock purchase agreement     3,975,383       397                                               699,603                       700,000  
Series B preferred stock retirement                     (500,000 )     (50                                                     (50 )
Retired common stock     (18,570,356 )     (1,857 )                                                                     (1,857 )
Subscription price adjustment                                                             (90,887 )                     (90,887 )
Net loss                                                                             (79,389 )     (79,389 )
Balance at June 30, 2020     113,144,222     $ 11,314              $          500,000     $ 50     $ 135,000     $ 38,400,539     $        $ (37,547,798 )   $ 999,105  
                                                                                         
Balance at December 31, 2020     125,327,579     $ 12,533              $          500,000     $ 50     $ 201,974     $ 43,201,186     $        $ (41,849,922 )   $ 1,565,821  
Common stock to be issued for Note receivable and True-up adjustment                                                                                         
Common stock to be issued for purchase of shares                                                     168,500                               168,500  
Common stock issued against common stock to be issued received in PY     108,965       11                                       (66,974 )     66,963                           
Common stock issued for severance payable of discontinued operation     379,463       38                                               224,963                       225,001  
Common stock issued for cash     1,712,500       171                                               433,829                       434,000  
Stock based compensation - stock options                                                             99,742                       99,742  
Net loss                                                                             (864,536 )     (864,536 )
Balance at March 31, 2021     127,528,507     $ 12,753              $          500,000     $ 50     $ 303,500     $ 44,026,683     $        $ (42,714,458 )   $ 1,628,528  
Common stock issued for services     1,114,351       111                                       (16,000 )     792,389                       776,500  
Common stock issued for cash     1,234,113       123                                       (152,500 )     402,376                       249,999  
Convertible note and accrued interest converted to common stock     2,647,464       265                                               582,442                       582,707  
Other     500,000       50                                               332,450       (332,500 )                 
Stock based compensation - stock options     —                                                          91,526                       91,526  
Loss on extinguishment of debt                                                             1,535,264                       1,535,264  
Net loss                                                                             (3,826,924 )     (3,826,924 )
Balance at June 30, 2021     133,024,435     $ 13,302              $          500,000     $ 50     $ 135,000     $ 47,763,130     $ (332,500 )   $ (46,541,382 )   $ 1,037,600  

 

 

 See accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

  6  

 

AXIM BIOTECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statement of Cash Flows

 

                 
   

For the

Six months Ended

June 30, 2021

 

For the

Six Months Ended

June 30, 2020

         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss   $ (4,691,457 )   $ (2,107,756 )
Less: Gain (Loss) from discontinued operations     (4,633 )     (357,430 )
Loss from continuing operations     (4,686,824 )     (1,750,326 )
                 
Adjustments to reconcile net loss to cash provided by (used in) operating activities:                
Depreciation     13,184       5,124  
Stock based compensation     191,266       287,500  
Amortization of prepaid insurance/expense     216,158       68,079  
Amortization of debt discount     203,121       41,432  
Common stock issued for services     776,500           
Amortization(impairment) of intangible assets     641,096       6,763  
Loss on extinguishment of debt     1,535,264           
Unrealized (gain) loss on marketable securities              104,705  
Realized (gain) loss on marketable securities              109,040  
                 
Changes in operating assets & liabilities:                
Increase in accounts receivable     (11,872 )         
(Increase) in interest receivable     (514 )         
Increase in prepaid insurance/expenses     (137,493 )     (94,779 )
Increase  in inventory     (20,509 )         
Increase  in accounts payable and accrued expenses     124,263     209,784  
Net cash provided by (used in) operating activities from continuing operations     (1,156,360 )     (1,012,678 )
Net cash provided by (used in) operating activities from discontinued operations     (4,633 )     (797,939 )
Net cash provided by (used in) operating activities     (1,160,993 )     (1,810,617 )
                 
CASH FLOW FROM INVESTING ACTIVITIES:                
Cash acquired in acquisition              79,814  
Purchase of property and equipment     (20,022 )     (70,828 )
Net cash provided by (used in) investing activities from continuing operations     (20,022 )     8,986  
Net cash provided by (used in) investing activities from discontinued operations                  
Net cash provided by (used in) investing activities     (20,022 )     8,986  
                 
CASH FLOW FROM FINANCING ACTIVITIES:                
Common stock issued under registration statement on Form S-3              1,510,500  
Common stock issued under SPA     852,500       700,000  
Proceed from First Insurance Funding     73,519       35,933  
Net cash provided by (used in) continuing financing activities     926,019       2,246,433  
Net cash provided by (used in) discontinued financing activities              (65,000 )
Net cash provided by (used in) financing activities     926,019       2,181,433  
                 
Net (decrease) increase in cash and cash equivalents     (254,996 )     379,802  
Cash and cash equivalents at beginning of period     457,181       511,630  
Cash and cash equivalents at end of period   $ 202,185     $ 891,432  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                
CASH PAID DURING THE PERIOD FOR:                
Interest   $        $     
Income taxes - net of tax refund   $        $     
NON-CASH INVESTING AND FINANCING ACTIVITIES                
Common stock issued against common stock to be issued   $ 66,974     $ 50,000  
Account receivable against conversion of debt and interest   $        $ 75,074  
Common stock issued for severance   $ 225,000     $ 150,000  
Shares issued for acquisition of Sapphire Biotechnology   $        $   7,506,000  
Deferred tax liability accounted for as a result of Sapphire Biotech Acquisition   $        $ 1,845,000  
Assets acquired and liability assumed for as a result of Sapphire Biotech Acquisition   $        $ 525,365  
BCF related to discount on conversion   $        $ 190,000  
Common stock issued for note receivable   $        $ 135,000  
Adoption of lease obligation and ROU asset   $        $ 164,910  
Common stock retired   $        $ 1,857  
Subscription price adjustment   $        $ 609,835  
Convertible note and accrued interest converted to common stock   $ 582,707     $     
Others   $        $ 71,782  

 

See accompanying notes are an integral part of these unaudited condensed consolidated financial statements 

  7  

AXIM BIOTECHNOLOGIES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021 and 2020

 

NOTE 1: ORGANIZATION

 

Axim Biotechnologies, Ind., (the “Company”) was originally incorporated in Nevada on November 18, 2010, as Axim International Inc. On July 24, 2014, the Company changed its name to AXIM Biotechnologies, Inc. to better reflect its business operations. The Company’s principal executive office is located at 6181 Cornerstone Court E Suite 114, San Diego, CA 92121. On August 7, 2014, the Company formed a wholly owned Nevada subsidiary named Axim Holdings, Inc. This subsidiary will be used to help facilitate the anticipated activities planned by the Company. On May 11, 2015 the Company acquired a 100% interest in Can Chew License Company a Nevada incorporated licensing Company, through the exchange of 5,826,706 shares of its common stock.

 

On March 17, 2020, the Company acquired Sapphire Biotech, Inc., (“Sapphire’) which is research and Development Company that has a mission to improve global cancer care through the development of proprietary therapeutics for inhibiting cancer growth and metastasis. Sapphire is also developing a line of novel diagnostics for early cancer detection, response to treatment, and recurrence monitoring. Additionally, with the onset of the COVID-19 pandemic, the Company decided to begin creating COVID-19 rapid diagnostic tools, including multiple first-in-class COVID-19 neutralizing antibody tests and other innovations.

 

Sapphire’s operations are located in the Greater San Diego Area.

 

Company Developments – Divesture of Cannabis Related Assets

 

On May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc., a Nevada corporation (the “Company”), entered into an Agreement (the “Separation Agreement”) by and among the Company, CanChew License Company (“CanCo”), CanChew Biotechnologies, LLC (“CanChew”), Medical Marijuana, Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip A. Van Damme (“Dr. Van Damme”), Lekhram Changoer (“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad Foundation, US (collectively, the “Sanammad Parties”), pursuant to which, among other matters as described herein, Drs. Anastassov and Van Damme and Mr. Changoer resigned as members of the Company’s Board of Directors.

 

Pursuant to the Separation Agreement, the Company transferred and assigned to an entity designated by Dr. Anastassov all of the Company’s cannabis-related intellectual property other than the inventions and discoveries described in that certain cannabis-related patent application filed by the Company’s wholly-owned subsidiary, Sapphire Biotech, Inc. (water-soluble cannabinoid molecules). The Company also transferred 100% of its interest in CanCo and CanChew to an entity designated by Dr. Anastassov. In consideration for the transfers set forth above, any and all indebtedness owed by the Company to CanChew, totaling approximately $2.61 million, was satisfied and paid in its entirety.

 

In addition, in consideration for the payment by the Company of $65,000, the Company purchased 100% of the issued and outstanding shares of Series B Preferred Stock held by the Sanammad Parties. Such shares shall be retired to treasury of the Company. The Sanammad Parties also agreed to forfeit and assign back to treasury, for no consideration, a total of 18,570,356 shares of the Company’s common stock.

 

NOTE 2: ACQUISITION OF SAPPHIRE BIOTECH, INC.

 

On March 17, 2020, the Company entered into a Share Exchange Agreement (“Agreement”) with Sapphire Biotech, Inc., a Delaware corporation (“Sapphire”) and all the Sapphire stockholders (collectively, the “Sapphire Stockholders”). Following the closing of the transaction, Sapphire will become a wholly owned subsidiary of AXIM.

 

Under the terms of the Agreement, the Company: (i) acquired 100% of Sapphire’s outstanding capital (consisting of 100,000,000 shares of common stock and zero (0) shares of Preferred Stock); and (ii) assume all of the outstanding debt of Sapphire. The outstanding debt includes two (2) convertible notes in the principal amounts of $310,000 and $190,000. Pursuant to the terms of the Share Exchange Agreement, the Company acquired 100% of the issued and outstanding shares of Sapphire by means of a share exchange with the Sapphire Stockholders in exchange for 54,000,000 newly issued shares of the common stock of AXIM (the “Share Exchange”). As a result of the Share Exchange, Sapphire became a 100% owned subsidiary of AXIM, which on a going forward basis will result in consolidated financial reporting by AXIM to include the results of Sapphire. The closing of the Share Exchange occurred concurrently with entry into the Share Exchange Agreement (the “Closing”).

 

  8  

 

In March 2020, the Company acquired SAPPHIRE BIOTECH, Inc., a biotechnology company focusing on improving cancer care through the development of proprietary therapeutics for inhibiting cancer growth and metastasis. The Company issued 54,000,000 shares of common stock with a total fair value of $7,506,000 and assumed net liabilities of $412,233 (resulting in a total acquisition cost of $7,918,233), in exchange for all outstanding shares of SAPPHIRE BIOTECH, Inc. The Company accounted for the acquisition using the acquisition method of accounting for business combinations. On the acquisition date, the Company performed a preliminary allocation of the purchase price to include the tangible assets acquired and the liabilities assumed with the remainder of the purchase price allocated to patents pending approval, in-process research and development (IPR&D) and goodwill. The Company incurred $6,000 of acquisition-related costs, which will be recorded as expense after the evaluation work been completed. In addition, the Company recorded an estimated deferred tax liability on the assets acquired, except for goodwill for which deferred taxes are not applicable.

 

The Company completed the valuation of the intangible assets acquired in the SAPPHIRE BIOTECH, Inc. transaction by September 2020. Pursuant to the valuation, the Company determined that the patents continue to be expanded and chose to subsume the patents within the IPR&D balance. In management’s judgment, the amount assigned to IPR&D represents the amount the Company would reasonably expect to pay an unrelated party for each project included in the technology. Based on the final valuation, the remaining excess purchase price has been allocated to goodwill.

 

The aggregate purchase price of $7,918,233 consisted of common stock valued at $7,506,000 and the net liabilities assumed of $412,233. The value of the $7,506,000 of common shares issued was determined based on the closing price of the Company’s common shares at the acquisition date.

 

The following table summarizes the consideration paid for SAPPHIRE BIOTECH and the estimated amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

 

       
Consideration:    
Cash and cash equivalents   $ 79,814  
Property and equipment, net     20,533  
In process Research & Development (IPRD)     7,800,000  
Goodwill     2,458,233  
Security deposit     12,785  
Total asset acquired   $ 10,371,365  
         
Accrued expenses and other current liabilities   $ 5,767  
Deferred taxes liability     2,340,000  
Notes Payable including convertible and discount on conversion     519,598  
Total liabilities assumed   $ 2,865,365  
Net assets acquired   $ 7,506,000  

 

  9  

 

The fair value of acquired IPR&D was determined using the income approach, based on the likelihood of success of products reaching final development and commercialization. The fair value of acquired IPR&D was capitalized as of the Closing Date and is subsequently accounted for as an indefinite-lived intangible asset until completion or abandonment of the associated research and development efforts. Accordingly, during the development period after the Closing Date, this asset will be amortized over a period of 36 months.

 

The acquired in process Research and development as it relates to rapid COVID testing has reached the commercialization stage and is awaiting FDA EUA. 

 

The $2,458,233 of goodwill is not expected to be deductible for tax purposes.

 

The effective settlement of receivable/payable between the Company and Sapphire deemed to be not material, which was recorded as gain on intercompany transaction in P&L.

 

NOTE 3: BASIS OF PRESENTATION:

 

The unaudited condensed consolidated financial statements of AXIM Biotechnologies, Inc. (formerly Axim International, Inc.) as of June 30, 2021, and for the three months period ended June 30, 2021 and 2020 have been prepared in accordance with United States generally accepted accounting principles (“US GAAP”).

 

The following (a) balance sheets as of June 30, 2021 (unaudited) and December 31, 2020, which have been derived from audited financial statements, and (b) the unaudited interim statements of operations and cash flows of AXIM Biotechnologies, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of results that may be expected for the year ending December 31, 2021. These unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 26, 2021. 

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Axim Biotechnologies, Inc. and its wholly owned subsidiaries Axim Holdings, Inc., Marina Street LLC, Axim Biotechnologies (the Netherland Company) and Sapphire Biotech, Inc. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated upon consolidation.

 

NOTE 4:GOING CONCERN

 

The Company’s condensed consolidated financial statements have been presented assuming that the Company will continue as a going concern. The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit as of June 30, 2021. The Company has historically financed its operations primarily through the sale of common stock, promissory notes and convertible notes. To date, none of the Company’s products related to continuing operations are still in the product development phase. Management expects operating losses to continue and increase for the foreseeable future, as the Company progresses into clinical development activities for its lead product candidates. The Company’s prospects are subject to risks, expenses and uncertainties frequently encountered by companies in the biotechnology industry. As shown in the condensed consolidated financial statements, the Company has deficit in working capital of $952,445 and has an accumulated deficit of $46,541,382 and has cash used in operating activities of continuing operations $1,156,360 and discontinued operations of $4,633. The Company intends to raise substantial additional capital through private placements of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable to the Company or will be sufficient to enable the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. That will raise a doubt about the ability of the Company to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.

 

  10  

 

NOTE 5: SIGNIFICANT ACCOUNTING POLICIES

 

Use of estimates

 

The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during reporting periods. Actual results could differ from these estimates. Significant estimates are assumptions about collection of accounts receivable, intangible assets, useful life of intangible assets, determination of the discount rate for operating leases and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate and expected dividend rate.

  

Risks and uncertainties

 

The Company operates in a dynamic and highly competitive industry and is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturer and contract research organizations, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting. The Company believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows; ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company’s products; development of sales channels; certain strategic relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth.

 

Products developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that the products will receive the necessary approvals, or that any approved products will be commercially viable. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval, it could have a materially adverse impact on the Company. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

 

Beginning in late 2019, the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, has evolved into a global pandemic. The extent of the impact of the coronavirus outbreak on the Company’s business will depend on certain developments, including the duration and spread of the outbreak and the extent and severity of the impact on the Company’s clinical trial activities, research activities and suppliers, all of which are uncertain and cannot be predicted. At this point, the extent to which the coronavirus outbreak may materially impact the Company’s financial condition, liquidity or results of operations is uncertain. The Company has expended and will continue to expend substantial funds to complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. The Company may require additional funds to commercialize its products. The Company is unable to entirely fund these efforts with its current financial resources. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and operations.

 

  11  

 

There have been no material changes in the accounting policies from those disclosed in the financial statements and the related notes included in the Form 10-K.

 

Cash equivalents

 

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of June 30, 2021 and December 31, 2020, the Company had no cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company had no uninsured balances at June 30, 2021 and December 31, 2020. The Company has never experienced any losses related to these balances.

 

Accounts Receivable

 

It is the Company’s policy to review accounts receivable at least on monthly basis for conductibility and follow up with customers accordingly. Covid19 has slowed collection as our customers are in a mandated pause. The Company have geographic concentration of customers for the three months ending June 30, 2021 and 2020.

 

Concentrations

 

On June 30, 2021 and December 31, 2020, one customer accounted for 100% of accounts receivable. For the six months period ended June 30, 2021, one customer accounted for 100% of total revenue. For the six months period ended June 30, 2020, one customer accounted for 4% of total revenue. Accounts receivable and revenue were all generated from continuing operations for the six months ending June 30, 2021.

 

Inventory

 

Inventory consists of raw materials owned by the Company and are stated at the lower of cost or market. As of June 30, 2021 and December 31, 2020, the Company had $20,509 and $-0-; respectively.

 

Property and equipment

 

Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using straight-line method over the estimated useful life. New assets and expenditures that extend the useful life of property or equipment are capitalized and depreciated. Expenditures for ordinary repairs and maintenance are charged to operations as incurred. The Company’s property and equipment relating to continuing operations consisted of the following on June 30, 2021 and December 31, 2020, respectively, and none related to discontinued operations.

 

               
    June 30,   December 31,
    2021   2020
Equipment of continuing operations   $ 154,809     $ 134,788  
Less: accumulated depreciation   $ 43,877     $ 30,694  
Property, Plant and Equipment, Net    $ 110,932     $ 104,094  

 

For the six months ended June 30, 2021 and 2020, the Company recognized depreciation expense of $13,184 and $5,124, respectively.

 

In-Process Research and Development (IPR&D)

 

The fair value of IPR&D acquired through a business combination is capitalized as an indefinite-lived intangible asset until the completion or abandonment of the related research and development activities. When the related research and development is completed, the asset will be assigned a useful life and amortized.

 

The fair value of an IPR&D intangible asset is determined using an income approach. This approach starts with a forecast of the net cash flows expected to be generated by the asset over its estimated useful life. The net cash flows reflect the asset’s stage of completion, the probability of technical success, the projected costs to complete, expected market competition, and an assessment of the asset’s life-cycle. The net cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams.

 

The development of IPR&D reached completion in April 2021. 

 

Goodwill

 

Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least annually at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired.

 

Goodwill is tested for impairment annually or more frequently if events or changes in circumstances between annual tests indicate that the asset may be impaired. Impairment loss is recognized based on a comparison of the fair value of the asset to its carrying value, without consideration of any recoverability.  

 

 

  12  

 

Intangible Assets

 

As required by generally accepted accounting principles, trademarks and patents are amortized if they have a definite life, the amortization is estimated in straight line through three years starting in April 2021. The Company’s intangible assets relating to continuing operations and discontinued operations consisted of the following on June 30, 2021 and December 31, 2020, respectively.

 

               
    June 30,   December 31,
    2021   2020
Goodwill   $ 2,458,233     $ 2,458,233  
Research in progress   $ 7,800,000     $ 7,800,000  
Finite-Lived Intangible Assets, Gross   $ 10,258,233     $ 10,258,233  
                 
Less: accumulated amortization   $ 641,096     $     
Intangible Assets, Net (Including Goodwill)    $ 9,617,137     $     

 

Estimated aggregate amortization expense for each of the three succeeding years ending December 31 is as follows:

               
    2021   2022   2023   2024
Amortization expense   $ 1,951,779     $ 2,600,000     $ 2,600,000     $ 648,221  

 

Revenue Recognition

 

The Company follows the guidance contained in Topic 606 (FASB ASC 606). The core principle of Topic 606 (FASB ASC 606) is that an entity should recognize revenue to depict the transfer of goods of services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revenue recognition guidance contained in Topic 606, to follow the five-step revenue recognition model along with other guidance impacted by this standard: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transportation price; (4) allocate the transportation price; (5) recognize revenue when or as the entity satisfies a performance obligation. All revenue was from operations that were divested.

 

Revenues are recognized when title for goods is transferred; non-refundable fees and proceeds from irrevocable agreements recognized when inflows or other enhancements of assets of the Company are received.

 

Revenues from continuing operations recognized for three and six months ended June 30, 2021 and 2020 amounted to $14,875, $47,524, $0 and $-0-, respectively. Revenues from discontinued operations recognized for three and six months ended June 30, 2021 and 2020 amounted to $-0-, $-0-, and $7,990, $15,130,respectively.

 

Grant Income

In 2021 the Company has received government grants to drive its research and development efforts. Through these government grants, the government has provided funding for the Company to perform research and development activities which will assist in developing its products. The Company believes the government entities funding these grants are interested in the Company advancing its underlying technologies through research activities and not providing incentives for hiring employees or building facilities that would suggest that the grant monies are not for specific research activities. 

In determining how to classify the monies received under government grants, the Company acknowledges that there is no specific guidance under US GAAP and that the FASB and AICPA have often drawn upon the guidance in IAS 20 for classification. In considering the alternatives provided by IAS 20 for the presentation of these grants in the Company’s financial statements, the Company believes that recognizing the government grant proceeds as a component of other revenue is a better reflection of the economics of the arrangements as the Company earns the funding through the performance of research and development which is not one of the Company’s primary business activities or central to its operations. The Company believes that presenting research and development funding from government grants, as other revenue provides consistency in our financial reporting.  The Company also believes that this presentation clearly presents to users of its financial statements in one line the Company’s sources of funding from these grants. The Company notes that there are no contingencies associated with the receipt of or ability to retain the funds under the grant, other than undertaking and performing the related research and development activities. 

The Company recognizes funds received from contractual research and development services and from government grants as other revenue. These contracts and grants are not considered an ongoing major and central operation of the Company’s business. Our Income from Grants from Government for the three and six months ended June 30, 2021 and 2020 was $129,995, $219,995 and $-0-, $-0- respectively.

Cost of Sales

 

Cost of sales includes the purchase cost of products sold and all costs associated with getting the products to the customers including buying and transportation costs. Cost of sales all related to discontinued operations. 

 

Shipping Costs

 

Shipping and handling costs billed to customers are recorded in sales. Shipping costs incurred by the company are recorded in general and administrative expenses. Shipping costs all related to discontinued operations.

 

Fair Value Measurements

 

The Company applies the guidance that is codified under ASC 820-10 related to assets and liabilities recognized or disclosed in the financial statements at fair value on a recurring basis. ASC 820-10 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

  13  

 

Convertible Instruments

 

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for Derivative Instruments and Hedging Activities.”

 

Professional standards generally provide three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instruments are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of “Conventional Convertible Debt Instrument.”

 

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.

 

ASC 815-40 provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement, then the contract shall be classified as an asset or a liability.

 

Income Taxes

 

The Company follows Section 740-10, Income tax (“ASC 740-10”) Fair Value Measurements and Disclosures of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.

 

The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including reversals of any existing taxable temporary differences, projected future taxable income, tax planning strategies, and the results of recent operations. If the Company determines that it would be able to realize a deferred tax asset in the future in excess of any recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

 

  14  

 

Concentrations of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit.

 

Net Loss per Common Share

 

Net loss per common share is computed pursuant to section 260-10-45 Earnings Per Share (“ASC 260-10”) of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding and the member potentially outstanding during each period. In periods when a net loss is experienced, only basic net loss per share is calculated because to do otherwise would be anti-dilutive.

 

There were 30,335,782 common share equivalents at June 30, 2021 and 32,556,727 common shares at December 31, 2020. For the six months ended June 30, 2021 and 2020 these potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share.

 

Stock Based Compensation

 

All stock-based payments to employees and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options, are measured at fair value on the grant date and recognized in the statements of operations as compensation or other expense over the relevant service period. Stock-based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached, or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable the measurement date is the date the award is issued. The Company accounts for stock options issued to non-employees based on the estimated fair value of the awards using the Black-Scholes option pricing model in accordance with ASC 505-50, Equity-Based Payment to Non-employees. Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock options vest. The Company believes that the fair value of the stock options is more reliably measurable than the fair value of the services received. Stock options granted to non-employees are recorded at their fair value on the measurement date and are subject to periodic adjustments as such options vest and at the end of each reporting period, and the resulting change in value, if any, is recognized in the Company’s statements of operations and comprehensive loss during the period the related services are rendered.

 

Cost of Sales

 

Cost of sales includes the purchase cost of products sold and all costs associated with getting the products to the customers including buying and transportation costs.

 

Research and Development

 

The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. For the three and six months ended June 31, 2021 and 2020 the Company incurred research and development expenses of $48,066, $149,019 and $121,437, $126,292 from continuing operations, respectively. For the three months ended June 30, 2021 and 2020 the Company incurred research and development expenses of $-0-, $-0- and $-0-, $-0- from discontinued operations, respectively. The Company has entered into various agreements with CROs. The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. Payments made to CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

 

  15  

 

Recently Issued Accounting Standards

 

Accounting Standards Implemented Since December 31, 2020

 

ASC Update 2021-04

 

Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force)

 

The amendments in this Update affect all entities that issue freestanding written call options that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities that present EPS in accordance with the guidance in Topic 260, Earnings Per Share. The amendments in this Update do not apply to modifications or exchanges of financial instruments that are within the scope of another Topic. That is, accounting for those instruments continues to be subject to the requirements in other Topics. The amendments in this Update do not affect a holder’s accounting for freestanding call options.

  

ASC Update No. 2020-10

 

In October 2020, the FASB issued ASC Update No. 2020-10, Codification Improvements. Update No. 2020-10 amends a wide variety of Topics in the Codification in order to improve the consistency of the Codification and the application thereof, while leaving Generally Accepted Accounting Principles unchanged.

 

ASC Update No. 2020-06

 

In August 2020, the FASB issued ASC Update No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in Update No. 2020-06 simplify the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity.

 

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 818): Clarifying the Interaction Between Topic 808 and Topic 606, which clarifies when transactions between participants in a collaborative arrangement are within the scope of the FASB’s revenue standard, Topic 606. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. The adoption of this ASU did not have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof. See Note15 for more information related to the Company’s lease obligations.

 

In October 2018, the FASB issued ASU 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, that changes the guidance for determining whether a decision-making fee paid to a decision makers and service providers are variable interests. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. The adoption of this ASU did not have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

 

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We adopted this standard on its effective date of January 1, 2020. The adoption of this ASU did not have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

 

  16  

 

Other recent accounting pronouncements issued by the FASB and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

NOTE 6: PREPAID EXPENSES

 

Prepaid expenses consist of the following as of June 30, 2021 and December 31, 2020:

 

               
    June 30,   December 31,
    2021   2020
Prepaid insurance   $ 120,034     $ 45,983  
Prepaid services     57,224       209,940  
    $ 177,258     $ 255,923  

 

For the three and six months ended June 31, 2021 and 2020, the Company recognized amortization of prepaid expense of $105,353, $34,108 and $216,158, $68,079, respectively.

 

NOTE 7: PROMISSORY NOTE

 

On August 8, 2014 the Company entered into a Promissory Note Agreement with CanChew Biotechnologies, LLC (CCB), a related party (the owners of CCB also own a majority of the outstanding shares of the Company), under which it borrowed $1,000,000 to fund working capital. The original loan was a demand note bearing interest at the rate of 7% per annum, which amount, along with principal, was payable upon demand. The demand note was amended effective January 1, 2015 to reduce the annual interest rate to 3%. All other terms and conditions shall remain in full force and effect. The Company is in discussions to have the demand note modified or exchanged for a longer term, fixed maturity note.

 

On May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc., a Nevada corporation (the “Company”), entered into an Agreement (the “Separation Agreement”). Pursuant to the Separation Agreement, the Company transferred 100% of its interest in CanCo and CanChew to an entity designated by Dr. Anastassov. In consideration for the transfers set forth above, any and all indebtedness owed by the Company to CanChew, totaling approximately $2.61 million, was satisfied and paid in its entirety.

 

For the three and six months ended June 30, 2021 and 2020, the Company recognized interest expense of $59,576, $119,908 and $55,957, $106,075, respectively on this note all was related to discontinued operations.

 

On December 31, 2019, Sapphire Biotech, Inc. had entered into a Debt Exchange Agreement whereas the Company assumed three (3) loans totaling $128,375 of Debt owned by Sapphire Diagnostics, LLC which had an interest rate of 6% per annum. In the same Debt Exchange Agreement, the Company assumed four (4) additional loans made to Sapphire in 2019, which had an interest rate of 6% per annum. All seven (7) loans totaling $310,000, plus the aggregate interest accrued thereon of $14,218 making the face value of the new note $324,218. As of June 30, 2021 and December 31, 2020, the principal and accrued interest balances were $353,452 and $343,725, respectively.

 

  17  

 

The Company owes $5,000 to the chairman of the board of the Company for a working capital advance of $5,000 made in May of 2014, all was related to discontinued operations.

 

Under an agreement Mr. Changoer received on March 20, 2018 the Company issued 50,000 restrictive shares of its common stock and recorded $235,000 of compensation expenses in the accompanying consolidated financial statements to account for the issuance of the incentive shares. As of June 30, 2021 and December 31, 2020, the total outstanding balance was $20,000 and $60,000 respectively for consulting fees to Mr. Changoer included in accounts payable.

 

On September 25, 2018, the Company amended Independent Director Compensation agreement. Under the agreement in lieu of the share compensation due to independent director of the Company for his annual service ending May 23, Dr. Philip A. Van Damme shall receive cash compensation of $20,000. Started from August 1, 2019 the company has been paying monthly clinical trial fee of $5,000. As of June 30, 2021 and December 31, 2020, the total outstanding balance was $10,000 and $25,000, respectively included in accounts payable.

 

Effective January 1, 2019 the company entered into a thirty-months consulting agreement with the chairman of the board which pays a monthly consulting fee of $20,000. The company has also been paying a monthly bonus fee of 15,000; this additional fee is on a month-to-month basis at the discretion of management. As of June 30, 2021 and December 31, 2020, the total outstanding balance was $40,000 and $225,000 respectively for consulting fees included in accounts payable.

 

On May 6, 2020 (the “Effective Date”), AXIM Biotechnologies, Inc., a Nevada corporation (the “Company”), entered into an Agreement (the “Separation Agreement”) by and among the Company, CanChew License Company (“CanCo”), CanChew Biotechnologies, LLC (“CanChew”), Medical Marijuana, Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip A. Van Damme (“Dr. Van Damme”), Lekhram Changoer (“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad Foundation, US (collectively, the “Sanammad Parties”), pursuant to which, among other matters as described herein, Drs. Anastassov and Van Damme and Mr. Changoer resigned as members of the Company’s Board of Directors.

 

Pursuant to the Separation Agreement, the Company transferred and assigned to an entity designated by Dr. Anastassov all of the Company’s cannabis-related intellectual property other than the inventions and discoveries described in that certain cannabis-related patent application filed by the Company’s wholly-owned subsidiary, Sapphire Biotech, Inc. (water-soluble cannabinoid molecules). The Company also transferred 100% of its interest in CanCo and CanChew to an entity designated by Dr. Anastassov. In consideration for the transfers set forth above, any and all indebtedness owed by the Company to CanChew, totaling approximately $2.61 million, was satisfied and paid in its entirety.

 

In addition, in consideration for the payment by the Company of $65,000, the Company purchased 100% of the issued and outstanding 500,000 shares of Series B Preferred Stock held by the Sanammad Parties. Such shares shall be retired to treasury of the Company. The Sanammad Parties also agreed to forfeit and assign back to treasury, for no consideration, a total of 18,570,356 shares of the Company’s common stock.

 

In addition, each of Drs. Anastassov and Van Damme and Mr. Changoer have agreed to subject the shares of the Company’s common stock held by each of them to lock-up and leak-out restrictions, as follows: they shall not sell shares for a period of 12 months following the Effective Date and, thereafter, subject to a daily volume limitation of 5%, on an aggregate basis among them.

 

  18  

 

Further, the Company terminated the Consulting Agreement of Dr. Anastassov and the Employment Agreements for each of Dr. Van Damme and Mr. Changoer. In connection with the termination of Dr. Anastassov’s Consulting Agreement, the Company agreed to pay severance in the amount of $35,000 for March 2020 and $20,000 per month thereafter through July 2021 (the termination date contemplated by the Consulting Agreement). Commencing for the April 2020, the Company may, in its sole discretion, pay the $20,000 severance obligation by the issuance of shares of the Company’s common stock registered pursuant to the Registration Statement on Form S-8 filed with the Commission on May 29, 2015 (“S-8 Shares”). If the gross cash proceeds from the sale of any S-8 Shares issued in lieu of cash severance is less than $20,000, as determined 20 days after issuance of such S-8 Shares, then the Company has agreed to issue additional shares that would serve to “true-up” the value of the shares to the $20,000 monthly severance obligation; provided, however, that if 30 days after the date the severance payment is due the gross proceeds from the sale of S-8 Shares is less than $20,000, the Company must pay the shortfall in cash. In addition, for each month that Dr. Anastassov is entitled to receive severance, he shall receive S-8 Shares in an amount equal to the lesser of (a) 150,000 S-8 Shares, or (b) S-8 Shares valued at $15,000 based upon the closing price of the Company’s common stock as of the due date of the severance payment obligation. In connection with the termination of the Employment Agreements of Dr. Van Damme and Mr. Changoer, Mr. Changoer’s severance payments shall be $20,000 per month for 12 months, commencing April 2020 (paid in arrears) and Dr. Van Damme’s severance payments shall be $5,000 per month for 12 months, similarly commencing April 2020 and paid in arrears. The Company has the right to pay each of Dr. Van Damme’s and Mr. Changoer’s monthly severance payments in S-8 shares in lieu of cash subject to the same terms and restrictions (including true-up terms) as set forth above for Dr. Anastassov. As of June 30, 2021, the accrued severance payment was $40,000 to Dr. Anastassov, $20,000 to Mr. Changoer and $10,000 to Dr. Van Damme included in accounts payable.

 

The Company retains the right to prepay the severance obligations to Drs. Anastassov and Van Damme and Mr. Changoer, without penalty.

 

No claims were alleged by the Company against any party, and no claims were alleged against the Company. However, in connection with the transactions described above, the parties entered into a general mutual release of all claims.

 

NOTE 8: RELATED PARTY TRANSACTIONS

 

Related Party

 

The company has an employment agreement with Catlina Valencia at a rate of $15,000 per month commencing March 17, 2020. The agreement can be terminated with 30 days’ notice by either party.

 

The company has a consulting agreement with Glycodots LLC whereby it will provide the services of Dr. Sergei A. Svarovsky at a rate of $15,000 per month commencing March 17, 2020. The agreement can be terminated with 30 days’ notice by either party.

 

Purchase of Promissory Note and Forbearance Agreement

 

Effective May 4, 2020, the Company acquired from TL-66, a California limited liability company (“Seller”), a promissory note issued to Seller by Dr. Anastassov (“Maker”) dated December 1, 2017, with a face value of $350,000 and a remaining balance due of approximately $100,000 (the “Note”). The purchase price for the Note was $100,000 payable by the Company issuing Seller One Million (1,000,000) restricted shares of the Company’s Common Stock. Effective May 6, 2020, the Company and Maker entered into a Forbearance Agreement whereby the Company agreed to forbear from making any collection efforts on the Note for a period of 24 months so long as Maker has not breached the Separation Agreement. Following 24 months, if there has been no breach of the Separation Agreement by Maker, repayment of the Note, including all principal and unpaid interest, will be waived in full. As of May, 4, 2020 the carrying value of the note receivable was $102,567, the value of the common stock to be issued was $135,000, resulting in a loss of $32,433 accounted as loss on debt extinguishment related to discontinued operations. The balance of the Note Receivable as of June 30, 2021 and December 31, 2020 is $102,567 for both periods, plus interest accrued thereon of $1,188 and $675, respectively.

 

  19  

 

NOTE 9:DUE TO FIRST INSURANCE FUNDING

 

On June 25, 2020, the Company renewed its D&O insurance policy with total premiums, taxes and fees for $93,357. A cash down payment of $18,671 was paid on July 6, 2020. Under the terms of the insurance financing, payments of $8,456, which include interest at the rate of 4.6% per annum, are due each month for nine months commencing on July 25, 2020.

 

On June 25, 2021, the Company renewed its D&O insurance policy with total premiums, taxes and fees for $98,888. A cash down payment of $24,273 was paid on July 7, 2021. Under the terms of the insurance financing, payments of $1,797, which include interest at the rate of 4.420% per annum, are due each month for nine months commencing on July 25, 2021.

 

The total outstanding due to First Insurance Funding as of June 30, 2021 and December 31, 2020 is $98,888 and $25,369, respectively.

 

NOTE 10: CONVERTIBLE NOTES PAYABLE

 

The following table summarizes convertible note payable of related party as of June 30, 2021 and December 31, 2020:

 

           
  June 30, December 31,
  2021 2020
Convertible note payable, due on November 1, 2026, interest at 3.5% p.a. $ 4,000,000   $ 4,000,000  
Accrued interest   229,037     158,648  
Convertible note payable, net $ 4,229,037   $ 4,158,648  

 

In 2018 the Company extinguished debt with Investor. Investor had proposed a financing transaction pursuant to which the Company will satisfy and retire the Original Note and Original Note current balance in simultaneous exchange for and upon delivery by the Company of a (1) new Convertible Promissory Note in the principal amount of $4,000,000 (the “Exchange Note”), and (2) 400,000 shares of the Company’s restricted common stock (the “Origination Shares”).

 

Simultaneously, a third-party Investor and the Company entered in Debt Exchange Agreement with Medical Marijuana Inc. As part of this agreement Investor will exchange and deliver the AXIM note to Medical Marijuana in exchange for a Convertible Promissory note. Axim consented to the transfer and assignment of the Axim Note in exchange for the issuance by the Medical Marijuana of the Exchange Note. The interest on this note is payable bi-annually every May 1 and November 1. On May 1, 2019 the Company paid accrued interest of $60,278.

 

In 2020 the Company was authorized to apply the accounts receivable of $75,074 due from Kannaway towards its accrued interest.

 

On May 1, 2020, the Company agreed to modify its existing convertible note with a principal balance of $4 million, 3.5% interest rate convertible note with the current holder of that note. There were two changes to the existing agreement – (a) the conversion price was reduced from the $1.50 conversion price in the original Note to $0.25 cents in the modified Note and (b) the term of the note was extended from the original maturity date of November 1, 2021, to November 1, 2026. The Company’s stock closed trading on the day of the modification at $0.13 per share. The amendment of this convertible Note was also evaluated under ASC Topic 470-50-40, “Debt Modifications and Extinguishments.” Based on the guidance, the instruments were determined to be substantially different due to the change in the conversion price being substantial, and debt extinguishment accounting was applied. The fair value of the modified convertible note was not different than the carrying value of the original note as such no extinguishment loss was recorded, The Note prior to the amendment of approximately $4 million, and the fair value of the Note and embedded derivatives after the amendment of approximately $4 million. There were no unamortized debt issuance costs and the debt discount associated with the original 2018 Note.

 

For the three and six month ended June 30, 2021 and 2020, interest expenses was $35,389, $35,389, $70,389 and $70,389, respectively.

 

As of June 30, 2021 and December 31, 2020, the balance of secured convertible note was $4,229,037 and $4,158,648 which included $229,037 and $158,648 accrued interest, respectively.

 

  20  

 

The following table summarizes convertible note payable as of June 30, 2021 and December 31, 2020:

 

           
  June 30, December 31,
  2021 2020
Convertible note payable, due on October 1, 2029, interest at 3.5% p.a. $ 484,478   $ 484,478  
Convertible note payable, due on October 1, 2029, interest at 3.5% p.a.   500,000     1,000,000  
Convertible note payable, due on December 31, 2034, interest at 3% p.a.   190,000     190,000  
Convertible note payable, due on July 21, 2032, interest at 3.5% p.a.   609,835     609,835  
Accrued interest (The accrued interest and principal are both included in the captions titled “convertible note payable” in the balance sheet)   192,521     236,148  
Total   1,976,834     2,520,461  
Less: unamortized debt discount/finance premium costs   (640,552 )   (843,673 )
Convertible note payable, net $ 1,336,282   $ 1,676,788  

 

On September 16, 2016, we entered into a convertible note purchase agreement (the “Convertible Note Purchase Agreement” or “Agreement”) with a third-party investor. Under the terms of the Convertible Note Purchase Agreement the investor may acquire up to $5,000,000 of convertible notes from the Company. With various closings, under terms acceptable to the Company and the investor as of the time of each closing. Pursuant to the Agreement, on September 16, 2016 the investor provided the Company with $850,000 secured convertible note financing pursuant to four (4) Secured Convertible Promissory Notes (the “Notes”). Each of the Notes matures on October 1, 2029, and pay 3.5% compounded interest paid bi-annually. The Note are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder into shares of the Company common stock at a conversion price equal to $0.2201 per share.

 

As of June 30, 2021 and December 31, 2020, the balance of secured convertible notes was $564,945 and $556,420, which included $80,467 and $71,942 accrued interest, respectively.

 

On October 20, 2016 a third-party investor provided the Company with $1,000,000 secured convertible note financing pursuant to three (3) Secured Convertible Promissory Notes (the “Notes”). Each of the Notes mature on October 1, 2029 and pay 3.5% compounded interest paid bi-annually. The Notes are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder into shares of the Company’s common stock at a fixed conversion price equal of $0.2201 per share. The investor paid cash of $500,000 for one of the Notes and issued to the Company two (2) secured promissory notes of $250,000 each for two (2) Convertible Notes of $250,000 each. The two secured promissory notes issued by the investor (totaling $500,000) as payment for two (2) secured Notes totaling $500,000 mature on February 1, 2017 ($250,000) and March 1, 2017 ($250,000), bear interest at the rate of 1% per annum, are full recourse and additionally secured by 10,486,303 shares of Medical Marijuana, Inc. (Pink Sheets symbol: MJNA) and were valued at $858,828 based upon the closing price of MJNA on October 20, 2016. A debt discount was recorded related to beneficial conversion feature inn connection with this convertible note of $499,318, related to the beneficial conversion feature of the note to be amortized over the life of the note or until the note is converted or repaid. As of June 30, 2021 and December 31, 2020, this note has not been converted and the balance of secured convertible notes was $583,270 and $1,148,944, which included $83,270 and $148,944 accrued interest, respectively.

 

On June 7, 2021 the Company converted $500,000 of the Convertible Note with TL-66-LLC along with the accrued interest of $82,707 into 2,647,464 shares of the Company’s common stock at $0.2201 per share which resulted in a loss on extinguishment of debt of $1,535,264.

 

  21  

 

On December 31, 2019, Sapphire Biotech, Inc. entered into a Convertible Note Purchase Agreement whereas the Company issued a convertible note with a face value of $190,000 with a compounding interest rate of 3% per annum, the interest shall be payable annually beginning on December 31, 2020 until the maturity date of December 31, 2034, at which time all principal and interest accrued thereon shall be due and payable. The Convertible Note is secured by substantially all the Company’s tangible and intangible assets. In addition, the Convertible Note includes various non-financial covenants including the Company may not enter into any agreement, arrangement or understanding of any kind that would result in a transaction, or series of transactions, that would result in the sale of 50% or more of the Company’s capital stock without the prior approval of the holder.

 

Upon issuance, the Convertible Note was convertible into shares of the Company’s common stock at $1.90 per share. At December 31, 2019, the Company determined that the Convertible Note contained a beneficial conversion feature for which a full discount was recorded on the Convertible Note. The fair market value of the Company’s common stock was based upon the estimated per share acquisition price per the pending acquisition of the Company. The discount of $190,000 will be amortized using the effective interest method and will be fully amortized by December 31, 2034.

 

On March 17, 2020 the Company entered into a Share Exchange Agreement (“Agreement”) with Sapphire Biotech, Inc., a Delaware corporation (“Sapphire”) and all of the Sapphire stockholders (collectively, the “Sapphire Stockholders”). Following the closing of the transaction, Sapphire will become a wholly owned subsidiary of AXIM. Under the terms of the Agreement, the Company intends to assume the convertible notes in the principal amounts of $190,000. After the acquisition, the Convertible Note was able to convert 6,000,000 shares of Axim’s common stock. Upon assumption of the note, the Company recorded a beneficial conversion feature of $190,000. As of June 30, 2021 and December 31, 2020, the balance of secured convertible note was $198,566 and $195,716, which included $8,566 and $5,716 accrued interest, respectively.

 

On July 21, 2020 the Company entered into convertible note purchase agreement with Cross & Company, the Company owed to Cross & Company $609,835 of aggregated payments and desired to satisfy the amount due in full by issuing to Cross & Company a convertible promissory note. The convertible note matures on July 21, 2032 and incurred 3.5% compounded interest paid annually. The Note are secured by the assets of the Company, may not be pre-paid without the consent of the holder, and are convertible at the option of the holder into shares of the Company common stock at a conversion price equal to $0.37. Notwithstanding the foregoing, holder shall not be permitted to convert the note, or portion thereof, if such conversion would result in beneficial ownership by holder and its affiliates of more than 4.9% of the debtor’s outstanding common stock as of the date of conversion. The Company determined that that the conversion of the amounts due into a long-term convertible note resulted in a debt extinguishment due to the change in the fair values exceeding 10%. Accordingly, the loss of $823,497 was included in the statement of operations as loss on debt extinguishment. As of June 30, 2021 and December 31, 2020, the balance of secured convertible note was $630,053 and $619,381, which included $20,218 and $9,546 accrued interest respectively.

 

During the three and six months ended June 30, 2021 and 2020, the Company amortized the debt discount on all the notes of $181,295, $203,122 and $22,071, $41,432, respectively, to other expenses. As of June 30, 2021 and December 31, 2020, unamortized debt discount was $640,552 and $843,673, respectively.

 

NOTE 11: STOCK INCENTIVE PLAN

 

On May 29, 2015 the Company adopted its 2015 Stock Incentive Plan. Under the Plan the Company may issue up to 10,000,000 S-8 shares to officers, employees, directors or consultants for services rendered to the Company or its affiliates or to incentivize such parties to continue to render services. S-8 shares are registered immediately upon the filing of the Plan and are unrestricted shares that are free-trading upon issuance. As of June 30,2021 December 31, 2020 there were 13,033,335 and 9,806,000 shares available for issuance under the Plan. The Company recorded compensation expense of $91,526, $191,266 and $-0-, $-0 -during the three and six months ended June 31, 2021 and 2020.

 

On May 13, 2020, Alim Seit-Nebi the Chief Technology Officer and Co-Founder of Sapphire Biotechnology was granted the options to purchase 1 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options will vest six months from the date of grant, one third of the options will vest one year from the date of grant, and the remaining one third of the options will vest two years from the date of grant.

 

  22  

 

On May 13, 2020, Dr. Douglas Lake the Chief Clinical Officer and Co-Founder of Sapphire Biotechnology was granted the options to purchase 2 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options will vest six months from the date of grant, one third of the options will vest one year from the date of grant, and the remaining one third of the options will vest two years from the date of grant.

 

On May 13, 2020, Timothy R, Scott the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options vested immediately, one third of the options will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.

 

On May 13, 2020, Robert Cunningham the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the exercise price of $0.126 per share. One third of the options vested immediately, one third of the options will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.

 

On May 13, 2020, Maurico Bellora the Director of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the purchase price of $0.126 per share. One third of the options vested immediately, one third of the options will vest six months from the date of grant, and the remaining one third of the options will vest twelve months from the date of grant.

 

On September 10, 2020, Noel C. Gillespie the Senior Patent Attorney of Axim Biotechnology was granted the options to purchase 0.5 million shares of Axim common stock under the plan at the purchase price of $0.61 per share. One third of the options vested immediately, one third of the options will vest one year from the date of grant, and the remaining one third of the options will vest two years from the date of grant.

 

For the three and six months ended June 30, 2021 and 2020 the Company recorded compensation expense of $91,526, $191,266 and $-0-, $-0- respectively.

 

NOTE 12: STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

The Company has authorized 5,000,000 shares of preferred stock, with a par value of $0.0001 per share. Of the 5,000,000 authorized preferred shares, 4,000,000 are undesignated “blank check” preferred stock. The Company may issue such preferred shares and designate the rights, privileges and preferences of such shares at the time of designation and issuance. As of June 30, 2021, and December 31, 2020 there are -0- and -0- shares of undesignated preferred shares issued and outstanding, respectively.

 

There are zero shares issued and outstanding of Series A and Series B Preferred stock as of June 30, 2021. 

 

Series C Convertible Preferred Stock

 

On August 17, 2016 the Company designated up to 500,000 shares of a new Series C Convertible Preferred Stock (Series C Preferred Stock). The holders of the Series C Preferred are entitled to elect four members to the Company’s board of directors and are entitled to cast 100 votes per share on all other matters presented to the shareholders for a vote. Each share of Series C Convertible Preferred is convertible into one share of the Company’s common stock. The Series C Convertible Preferred designation contains a number of protective and restrictive covenants that restrict the Company from taking a number of actions without the prior approval of the holders of the Series C Preferred or the unanimous vote of all four Series C Directors. If at any time there are four Series C Directors, one such director must be independent as that term is defined in the Series C designation. Any challenge to the independence of a Series C Director is a right conferred only upon the holders of the Series B Convertible Preferred Stock and may only be made by the holders of the Series B Convertible Preferred Stock.

 

  23  

 

On August 18, 2016 the Company issued all 500,000 shares of its newly designated Series C Preferred Stock to MJNA Investment Holdings, LLC in exchange for cash of $65,000. As the holders of the Series C Preferred Stock, MJNA Investment Holdings, LLC has designated Dr. Timothy R. Scott, John W. Huemoeller II, Robert Cunningham and Blake Schroeder as their four Series C Directors.

 

On February 20, 2019, MJNA Investment Holdings LLC (“Seller”) sold its 500,000 shares of AXIM Biotechnologies, Inc.’s, a Nevada corporation (the “Company”) Series C Preferred Stock to Juniper & Ivy Corporation, a Nevada corporation (“Purchaser”) for a purchase price of $500,000 (the “Purchase Price”) pursuant to a Preferred Stock Purchase Agreement (the “Purchase Agreement”). Payment of the Purchase Price was made as follows (i) a $65,000 payment made by check payable to Seller, which Purchaser borrowed from an unrelated third-party and which has no recourse against the Series C Preferred Stock or assets of Purchaser (the “Loan”), and (ii) the issuance by Purchaser to Seller of a promissory note, face value, $435,000, which has no recourse against the Series C Preferred Stock or assets of Purchaser (the “Note”). The Company’s Chief Executive Officer John W. Huemoeller II is the President of Purchaser. Mr. Huemoeller provided a personal guaranty for the Loan and the Note.

 

The holders of the Series C Preferred Stock are entitled to elect four members to the Company’s Board of Directors and are entitled to cast 100 votes per share on all other matters presented to the shareholders for a vote. As a result of this transaction, a change in control has occurred.

 

Effective April 2, 2019, Blake N. Schroeder resigned as a member of the Company’s Board of Directors. Mr. Schroeder’s resignation was not because of any disagreements with the Company on matters relating to its operations, policies and practices.

 

On April 3, 2019 pursuant to the Company’s Amended and Restated Bylaws, the holder of the Company’s Series C Preferred Stock appointed Mauricio Javier Gatto-Bellora to fill the director seat vacated by the resignation of Mr. Schroeder.

 

On July 21, 2020 pursuant to the Company’s Amended and Restated Bylaws, the holder of the Company’s Series C Preferred Stock appointed Peter O’Rourke to fill one of the vacant positions on board created by the resignations of Dr. George Anastassov, Lekhram Changoer, and Dr. Philip Van Damme.

 

Common Stock and Common Stock Warrants

 

Common Stock

 

The Company has authorized 300,000,000 shares of common stock, with a par value of $0.0001 per share. As of June 30, 2021, and December 31, 2020, the Company had 133,024,435 and 125,327,579 shares of common stock issued and outstanding, respectively.

 

2021 Transactions:

 

Common Stock

  

On May 14, 2021, The Company entered into the Equity Purchase Agreement with Cross, pursuant to which we have the right to “put,” or sell, up to $10,000,000 worth of shares of our common stock to Cross. As provided in the Equity Purchase Agreement, we may require Cross to purchase shares of our common stock from time to time by delivering a put notice to Cross specifying the total number of shares to be purchased (such number of shares multiplied by the purchase price described below, the “Investment Amount”); provided there must be a minimum of ten trading days between delivery of each put notice. We may determine the Investment Amount, provided that such amount may not be more than 500% of the average daily trading volume in dollar amount for our common stock during the five trading days preceding the date on which we deliver the applicable put notice, unless waived by Cross in its sole discretion. Additionally, such amount may not be lower than $10,000 or higher than $1,000,000. Cross will have no obligation to purchase shares under the Equity Line to the extent that such purchase would cause Cross to own more than 4.99% of our issued and outstanding shares of common stock.

 

  24  

 

 

In June 2021 the company issued 500,000 restricted shares of its common stock valued at $332,500 pursuant to S-1 Agreement to third party for certain services, recorded as subscription receivable.

 

During April, May and June 2021 the company issued 2,647,464 restricted shares of its common stock valued at $582,707 pursuant to conversion of convertible note (Note 10) with a loss of extinguishment of debt $1,535,264.

 

During April, May and June 2021 the Company issued 1,234,113 shares for cash of gross proceed of $402,500 pursuant to various Warrant Stock purchase agreements. The cash was received in the second quarter ending 2021. Out of these 519,828 shares of common stock valued at $152,500 was adjusted with common stock to be issued of prior period. The company also issued warrants to purchase 175,000 shares of common stock at an exercise price of $0.75 and 714,285 shares of common stock at an exercise price of $0.80. Warrants are exercisable within a 3 year period from issuance.

  

During April, May and June 2021 the company issued 1,114,351 restricted shares of its common stock valued at $792,389 to third parties for certain services, recorded as consulting fees.

 

During March 2021 the Company issued 1,712,500 shares for cash of gross $434,000 pursuant to various Stock purchase agreements. The cash was received in the first quarter ending 2021.The company also issued warrants to purchase 900,000 shares of common stock at an exercise price of $0.75. Warrants are exercisable within a 3 year period from issuance.

 

Company paid finders fees of $20,000 in cash during this period for capital raise and will also issue shares equaling $16,000 in market value, which was issued during the three months ended June 30, 2021.

 

On March 18, 2021 the company issued 488,428 restricted shares of its common stock valued at $291,974 to third parties for certain services, recorded as consulting fees. Out of these 108,965 shares of common stock valued at $66,974 was adjusted with common stock to be issued of prior year.

 

2020 Transactions:

 

During the period between January 1, 2020 and December 31, 2020 the Company issued total 17,292,751 shares valued $3,309,130 pursuant to the Company’s Registration Statement on Form S-3. The Company received $3,309,130 in cash.

 

On January 13, 2020 the Company issued 250,000 restricted shares of its common stock to third party valued at $50,000, which were carried on the books as stock to be issued.

 

On January 23, 2020 and February 26, 2020 the Company issued 600,000, and 62,839 restricted shares of its common stock to third party valued at $262,500, and $25,000 pursuant to the stock purchase agreement for certain services, recorded as advertising and promotion expense and License, permits & Patents, respectively.

 

On March 17, 2020 the company acquired 100% of the issued and outstanding shares of Sapphire by means of a share exchange with the Sapphire Stockholders in exchange for 54,000,000 restricted shares of its common stock at valued $7,506,000.

 

On April 21, 2020 the Company issued 1,176,470 restricted shares of its common stock to third party valued at $100,000 pursuant to the stock purchase agreement. The cash was received in 2020.

 

On May 6, 2020, the Company entered into an agreement with Sanammad Foundation, the Sanammad Parties agreed to forfeit and assign back to treasury, for no consideration, a total of 18,570,356 shares of the Company’s common stock, for which the fair value was $2,562,709, however for accounting purpose this transaction recording at par value adjustment to additional paid in capital. This transaction is related to the divesture of the previous operations to Sanammad.

 

  25  

 

On May 22, 2020 the Company issued 190,810 and 286,215 S-8 shares valued at $60,000 and $90,000 pursuant to the Company’s Registration Statement on Form S-8 for severance fees.

 

On June 10, 2020 and June 24, 2020 the Company issued 2,173,913 and 625,000 restricted shares of its common stock to third party valued at $500,000 and $100,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.

 

On July 1, 2020 the Company issued 185,185 and 370,370 restricted shares of its common stock to third party valued at $25,000 and $50,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.

 

On July 2, 2020 and July 9, 2020 the Company issued 714,285 and 1,785,714 restricted shares of its common stock to third party valued at $100,000 and $250,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.

 

On July 10, 2020 the Company issued 5,141,377 restricted shares of its common stock in exchange for the conversion of $51,414 of a convertible note payable, which included $6,414 in interest.

 

On July 10, 2020 the Company issued 142,857 and 357,153 restricted shares of its common stock to third party valued at $20,000 and $50,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.

 

On July 10, 2020 the Company issued 250,000 and 107,143 restricted shares of its common stock to third party valued at $35,000 and $15,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.

 

On July 14, 2020 the Company issued 200,000 restricted shares of its common stock to third party valued at $23,630 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.

 

On July 21, 2020 the Company entered into convertible note purchase agreement with Cross & Company, the Company owed to Cross & Company $609,835 of aggregated True-Up payments due to subscription price adjustment and desired to satisfy the amount due in full by issuing to Cross & Company a convertible promissory note (see note 10).

 

On July 22, 2020 the Company issued 65,359 and 130,719 restricted shares of its common stock to third party valued at $20,000 and $40,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.

 

On July 22, 2020 the Company issued 163,398 and 326,797 restricted shares of its common stock to third party valued at $50,000 and $100,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.

 

On July 22, 2020 the Company issued 816,993 and 65,359 restricted shares of its common stock to third party valued at $250,000 and $20,000 pursuant to the stock purchase agreement. The cash was received in 2020, respectively.

 

On July 24, 2020 359,524 shares for the purchase of prepaid marketing expenses valued at $302,000

 

On August 4, 2020 the Company issued 141,243 restricted shares of its common stock to third party valued at $50,000 pursuant to the stock purchase agreement. The cash was received in 2020.

 

On August 6, 2020 the Company issued 148,166 and 166,686 S-8 shares valued at $120,000 and $135,000 pursuant to the Company’s Registration Statement on Form S-8 for severance fees.

 

On August 12, 2020 the Company issued 414,419 restricted shares of its common stock to third party valued at $76,690 pursuant to the stock purchase agreement for certain services, recorded as commission fees.

 

On December 7, 2020 the Company issued 130,609 S-8 shares of its common stock to third party value at $75,000 pursuant to the Company’s Registration Statement on Form S-8 for severance fees.

 

  26  

 

NOTE 13: STOCK OPTIONS

 

Options to purchase common stock are granted at the discretion of the Board of Directors, a committee thereof or, subject to defined limitations, an executive officer of the Company to whom such authority has been delegated. Options granted to date generally have a contractual life of ten years.

 

The stock option activity for six months ended June 30, 2021 and the year ended December 31, 2020 is as follows:

 

               
   

Options

Outstanding

 

Weighted

Average

Exercise Price

Outstanding at December 31, 2019     2,000,000     $ 0.75  
Granted     8,300,000       0.27  
Exercised                  
Expired or canceled                  
Outstanding at December 31, 2020     10,300,000         0.36  
Granted                  
Exercised                  
Expired or canceled     (2,000,000 )     0.75  
Outstanding at June 30, 2021     8,300,000     $ 0.36  

 

The following table summarizes the changes in options outstanding, option exercisability and the related prices for the shares of the Company’s common stock issued to employees and consultants under a stock option plan at June 30, 2021 and December 31,2020: 2,000,000 options issued to John Huemoeller were canceled to allow for issuances to other employees.

 

As of June 31, 2021

 

                                   
        Options Outstanding                   Options Exercisable        
 

Weighted

Average

Exercise

Price ($)

   

Number

Outstanding

   

Weighted

Average

Remaining

Contractual Life

(Years)

     

Weighted

Average

Exercise

Price ($)

   

Number

Exercisable

   

Weighted

Average

Exercise

Price ($)

 
$ 0.36     8,300,000     9.5     $ 0.36     6,966,665   $ 0.36  
                                     

 

As of December 31, 2020

 

        Options Outstanding                   Options Exercisable        
 

Weighted

Average

Exercise

Price ($)

   

Number

Outstanding

   

Weighted

Average

Remaining

Contractual Life

(Years)

     

Weighted

Average

Exercise

Price ($)

   

Number

Exercisable

   

Weighted

Average

Exercise

Price ($)

 
$ 0.36     10,300,000     9.8     $ 0.36     7,466,662   $ 0.36  
                                     

 

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The Company determined the value of share-based compensation for options vested using the Black-Scholes fair value option-pricing model with the following weighted average assumptions:

 

               
    June 30,   December 31,
    2021   2020
Expected life (years)     10       10  
Risk-free interest rate (%)     1.74       0.61  
Expected volatility (%)     190       230  
Dividend yield (%)     —         —    
Weighted average fair value of shares at grant date   $ 1.74     $ 0.61  

 

For the three months ended June 30, 2021 and 2020 stock-based compensation expense related to vested options was $91,526 and $0, respectively.

 

For the six months ended June 30, 2021 and 2020 stock-based compensation expense related to vested options was $191,266 and $0, respectively.

 

NOTE 14: DISCONTINUED OPERATIONS

 

During May 2020 the Company decided to discontinue most of its operating activities pursuant to the Separation Agreement entered into by and among the Company, CanChew License Company (“CanCo”), CanChew Biotechnologies, LLC (“CanChew”), Medical Marijuana, Inc., Dr. George A. Anastassov (“Dr. Anastassov”), Dr. Philip A. Van Damme (“Dr. Van Damme”), Lekhram Changoer (“Mr. Changoer”), Sanammad Foundation, Netherlands and Sanammad Foundation, US (collectively, the “Sanammad Parties”). (see Note 1)

 

Pursuant to the terms of the Purchase Agreement dated as of May 6, 2020, Sanammad Parties agreed to acquire from the Company substantially all of its assets and its wholly-owned subsidiaries and to assume certain liabilities and its wholly-owned subsidiaries. Sanammad Parties agreed to pay a purchase price of $2,609,100 reflected in amount due Canchew were deemed paid in full. The sale, which was completed on May 6, 2020, did not include the Company’s cash and certain other excluded assets and liabilities.

 

The assets sold and liabilities transferred in the transaction were the sole revenue generating assets of the Company. The results of operations associated with the assets sold have been reclassified into discontinued operations for periods prior to the completion of the transaction.

  

The following is a summary of assets and liabilities sold, stock retired and gain recognized, in connection with the sale of assets to Sanammad parties:

 

       
Other current assets   $ 5,000  
Total current assets   $ 510,017  
Intangible assets, net of amortization   $ 47,375  
Total asset   $ 562,392  
         
Notes payable   $ 880,000  
Accounts payable and accrued expenses   $ 210,640  
Due to Canchew   $ 1,526,603  
Stock retired   $ 1,857  
Total liabilities and equity   $ 2,619,100  
         
The gain on sale of assets was reported during the period was determined as follows:        
Loss on sale of assets   $ 562,392  
Gain on sale of liabilities   $ 2,619,100  
         
Net gain from sale of assets and liabilities   $ 2,056,708  

 

 

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The resulting gain from the sale will be fully offset by existing net operating loss carryforwards available to the Company.

 

For the six months ended June 30, 2021 and 2020 the Company recognized interest expense of $-0- and $-0-, respectively.

 

Additionally, the operating results and cash flows related to assets sold on May 06, 2020 are included in discontinued operations in the consolidated statements of operations and consolidated statements of cash flows for the twelve months ended December 31, 2020 and 2019.

 

As of June 30, 2021 and 2020, the Company has nil asset and liabilities of the discontinued operations in the unaudited condensed consolidated balance sheet in accordance with the provision of ASC 205-20.

 

Loss from Discontinued Operations

 

The sale of the majority of the assets and liabilities related to the Sanammad parties represents a strategic shift in the Company’s business. For this reason, the results of operations related to the assets and liabilities held for sale for all periods are classified as discontinued operations.

 

The following is a summary of the results of operations related to the assets and liabilities held for sale (discontinued operations) for the six months ended June 30, 2021 and 2020:

 

               
                 
   

June 30,

2021

 

June 30,

2020

Net sales   $        $ 5,097  
Total expenses   $ (4,633 )   $ (2,321,852 )
Gain from sale of asset and liability   $        $ 2,046,708  
Other loss (income)   $        $ (87,383 )
Loss from discontinued operations   $ (4,633 )   $ (357,430 )

 

The following is a summary of net cash provided by or used in operating activities, investing activities and financing activities for the assets and liabilities held for sale (discontinued operations) for the six months ended June 31, 2021 and 2020:

 

                 
   

June 30,

2021

 

June 30,

2020

Income (loss) from discontinued operations   $ (4,633 )   $ (357,430 )
                 
                 
Adjustment of non-cash activities              (1,809,325 )
Decrease in accounts receivable              315,684  
Increase in inventory              (22,203 )
Increase in accounts payable and accrued expenses              1,075,335  
Net cash provided by (used in) operating activities   $ (4,633 )   $ (797,939 )
                 
Net cash provided by (used in) investing activities   $        $     
Net cash provided by (used in) financing activities   $        $     

 

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NOTE 15: COMMITMENT AND CONTINGENCIES

 

On January 2, 2019 the Company entered into the term of Executive’s employment agreement, at a base salary of $10,000 per month with John W. Huemoeller II to serve as its Chief Executive Officer. The Company and Executive acknowledge and agree that Executive’s employment hereunder shall at all times be “at will,” which means that either Executive may resign at any time for any reason or for no reason, and that the Company may terminate Executive’s employment at any time for any reason or for no reason, in either case, subject to the applicable provisions of this Agreement. In further consideration for Executive’s services and subject to the approval of the Board, Executive will be granted an option to purchase 2,000,000 shares of the Company’s common stock (the “Option Shares”). The option will be subject to the terms and conditions applicable to stock options granted under the Company’s 2015 Stock Incentive Plan, as amended from time to time (the “Plan”), and as described in the Plan and the stock option agreement, which Executive will be required to sign. 50% of the Option Shares shall vest on the date of grant and the remaining 50% of the Option Shares shall vest on the 12- month anniversary of the grant date, subject to Executive’s continued employment by the Company. The exercise price per share will be equal to the fair market value per share on the date of grant, as determined by the last closing price of the Company’s common stock the day prior to grant. Beginning in October 2019, the board decided to increase CEO base salary to $35,000 per month.

 

On April 24, 2017 the company entered into an employment agreement with Robert Malasek, its Chief Financial Officer and Secretary. The agreement does not have a set term and may be terminated at any time by the Company or Mr. Malasek with proper notice. The shares were issued in the 1st quarter 2018. Beginning in October 2019, the board ratified to increase CFO base salary to $3,000 per month.

 

On August 21, 2018, AXIM Biotechnologies, Inc. (the “Company”) entered into an agreement with Revive Therapeutics Ltd. (“Revive”) to begin selling the Company’s flagship nutraceutical product throughout the rapidly expanding Canadian cannabis market. The agreement defines a relationship where Revive will seek regulatory approval for AXIM’s proprietary, controlled-release functional chewing gum which contains hemp oil and cannabidiol (CBD). Under the terms of the agreement, Revive will have a minimum purchase amount annually, which increases each year for the term of the agreement.

 

On September 10, 2018, AXIM Biotechnologies, Inc. (the “Company”) entered into a Letter of Intent (“LOI”) with Impression Healthcare Limited (“Impression”), Australia’s largest home dental impression company, for exclusive distribution of all AXIM® Biotech products throughout Australia and New Zealand.

 

Pursuant to the LOI, both parties will endeavor to enter into a definitive agreement whereby the parties will co-develop new products, initially for pre-clinical and phase 1 trials (among other clinical trials), including an oral rinse liquid targeted for the treatment of oral mucositis, strep throat, oral infections and gum disease. Pending initial discussions and an internal review of AXIM® Biotech and its product offerings, Impression will collaborate with AXIM® Biotech for the licensing and distribution of its current and future medicinal cannabis products for distribution in Australia and New Zealand. On December 20, 2018 the Company signed Exclusivity Agreement on terms that include Exclusivity period of 90 days after the date on which this agreement is executed with Impression in exchange for 10,300,000 ordinary fully paid shares in Impression at the price of A$0.02 per share and exchange rate of $0.74 AUD/USD valued $150,000 which the Company recognized as a revenue in 4th quarter of 2018. During the year ended December 31, 2019, the Company received another 2,000,000 shares and sold 7,375,000 shares. On April 14, 2020 the Company entered into deed of settlement and release with Impression Healthcare Limited and transferred 4,925,000 held shares back to Impression Healthcare Limited by way of sale and purchase, with the total amount payable by Impression Healthcare Limited to Axim for completion of the sale and purchase and transfer being the aggregate amount of $1.

 

On May 31, 2019, AXIM Biotechnologies, Inc. (“AXIM”) entered into a cannabinoid product supply agreement with Impression Healthcare Limited (“Impression”), Australia’s largest home dental impression company, for the supply of the AXIM’s toothpaste and mouthwash containing cannabidiol (CBD) for its clinical trial for the treatment of periodontitis. The supply agreement is in preparation for a clinical trial to test the effectiveness of CBD in treating periodontitis. The clinical trial will be performed at Swinburne University of Technology in Melbourne, Australia. In accordance with the agreement, AXIM will supply the first batch of its patented toothpaste and mouthwash products containing CBD, along with associated placebo units for Impression to perform a randomized control clinical trial. On April 14, 2020 the Company terminated its supply agreement with Impression Healthcare Limited by mutual consent of both parties.

 

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On July 2, 2019, AXIM Biotechnologies, Inc. (“AXIM”) entered into a multi-term, non-exclusive license and distribution agreement (“Agreement”) with Colorado based gum developer, KISS Industries, LLC (“KISS Industries”). Under the terms of the Agreement, AXIM grants KISS Industries a non-exclusive license to formulate and sell products that fall within AXIM’s cannabinoid chewing gum patent in exchange for royalties to be paid to AXIM based upon KISS Industries sales in the United States and Mexico. The Agreement also grants AXIM the right to: (i) acquire 10 percent of KISS Industries under certain conditions; and (ii) match any outside future offer to acquire KISS Industries as a whole. Further, AXIM’s CEO John W. Huemoeller II will also join the Board of Directors of KISS Industries.

 

In exchange for this license Kiss Industries will pay Axim 6% of gross sales as a royalty on all licensed products sold by Kiss. In the territory covered by this license which is the USA and Mexico. (Minimum annual royalty $50,000). Kiss will manufacture for Axim various licensed products at a price equal to 140% of Kiss’s cost. As of June 30, 2021 and December 31, 2020 Kiss Industries did not sell any Axim’s products.

 

Industry Sponsored Research Agreement— Sapphire entered into the Industry Sponsored Research Agreement (“SRA”) effective February 7, 2020 to test and confirm the inhibitory activity of SBI-183 (exclusively licensed on January 13, 2020) and SBI-183 analogs, including those synthesized by the Company. The testing will include cell-based in vitro assays, NMR binding studies and testing to determine if SBI-183 enhances the activity of cytotoxic drugs in vitro. Animal studies will also be conducted under the SRA. Specifically, SBI-183 analogs will be evaluated in a mouse model of triple negative breast cancer using human tumor xenografts. The work will be performed over a period of one year with the total cost of the SRA totaling $150,468 paid prior to acquisition. In consideration of the License executed between Skysong Innovations and the Company, the SRA provides for a reduced overhead of 5% instead of the usual 67.7%. This overhead fee differential of $89,851 will be deferred for five (5) years with interest of 5% compounded annually. For the six months ended June 30, 2021, the Company recorded research and development expenses of $191,266.

 

On August 5, 2020 Sapphire was awarded a $395,880 phase I Small Business Innovation Research (SBIR) grant by the National Cancer Institute (NCI). The grant will support continued development of novel small molecules that inhibit the enzymatic activity of Quiescin Sulfhydryl Oxidase I (QSOX1) based on a lead compound. QSOX1 is a tumor-derived enzyme that is important for cancer growth, invasion and metastasis. Sapphire is conducting this research with technology it has exclusively licensed from Skysong Innovations, LLC, the intellectual property management company for Arizona State University. Sapphire will subcontract tumor biology work for evaluating analog inhibitors for QSOX1 to Dr. Doug Lake’s laboratory at Arizona State University and Mayo Clinic Arizona. Grant income received for the six months ended June 30, 2021 and 2020 was $159,995 and $-0-; respectively.

 

On August 25, 2020 we signed an exclusive licensing, manufacturing and distribution agreement with Empowered Diagnostics LLC to execute the high-volume production of our rapid point-of-care diagnostic test. AXIM and Empowered have completed the technology transfer and Empowered Diagnostics has built out their production facility to be able to manufacture millions of our neutralizing antibody tests for Covid-19 per month. In exchange for this license Empowered will pay Axim a royalty on net sales on all licensed products sold by Empowered covered by this license which global with the exception of Mexico.

 

Operating Lease

 

Lease Agreement—On March 3, 2020, Sapphire entered into a 3-year lease agreement (“Lease”) to relocate to a larger space within the same business park. The new space totals 1,908 square feet with monthly base rent in the 1st year $4,713, 2nd year $4,854 and 3rd year $5,000 at implicit interest rate of 6%. Upon commencement of the Lease on April 25, 2020, the previous lease will expire.

 

Operating Leases - Right of Use Assets and Purchase Commitments Right of Use Assets

 

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We have operating leases for office space that expire through 2023. Below is a summary of our right of use assets and liabilities as of June 30, 2021.

 

       
Right-of-use assets   $ 104,185
       
Lease liability obligations, current   $ 58,540
Lease liability obligations, noncurrent     45,646
Total lease liability obligations   $ 104,186
       
Weighted-average remaining lease term     1.83 years
       
Weighted-average discount rate     6%

 

The following table summarizes the lease expense for the three months ended June 30, 2021 and 2020:

 

               
    June 30,   June 30,
    2021   2020
Operating lease expense   $ 28,560 *   $ 4,713 **
Short-term lease expense     7,379       10,458  
Total lease expense   $ 35,939     $ 15,171  

 

* We recorded $35,939 of operating lease expense this includes $7,379 of maintenance.
** The first lease payment was made and adjusted in preacquisition cost.

 

Approximate future minimum lease payments for our right of use assets over the remaining lease periods as of June 30, 2021, are as follows:

 

       
Remainder of 2021     $ 29,124
2022       59,416
2023       20,000
Total minimum payments       108,540
Less: amount representing interest       (4,354)
Total     $ 104,186
         

 

Litigation

 

As of June 30, 2021, and this report issuing date, the Company is not a party to any pending material legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against the Company. To the knowledge of management, no director, executive officer or affiliate of the Company, any owner of record or beneficially of more than five percent of the Company’s Common Stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

 

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NOTE 16: SUBSEQUENT EVENTS

 

August 03, 2021,the Company announced that they have signed a Binding Term Sheet to acquire the technology for the testing of Dry Eye Disease (DED), including two FDA authorizations and approvals for the commercial sale of two ophthalmic diagnostic lab tests.

 

AXIM and Advanced Tear Diagnostics, LLC, have signed a Binding Term Sheet and intend to enter into the Definitive Agreement for the transaction to close no later than October 1, 2021. However, the Binding Term Sheet will remain in full force and effect until such time as the Definitive Agreement is executed by the parties. AXIM intends to immediately implement the strategy for commercial launch of the first product projected for the beginning of 2022.

 

August 10, 2021, the company issued 122,000 restricted shares of its common stock to a third party valued at $50,000 pursuant to a stock purchase agreement. The cash was received in 2021.

 

The company issued 115,554 restricted s8 shares of its common stock valued at $100,000 to a third party for prepaid consulting services. In addition the vendor will be compensated at a rate of $7,500 per month. The agreement has a one year term.

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the Securities and Exchange Commission (the “SEC”). You may read and copy any document we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549, U.S.A. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC’s internet site at http://www.sec.gov.

 

On our Internet website, http://www.aximbiotech.com, we post the following recent filings as soon as reasonably practicable after they are electronically filed with or furnished to the SEC: our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

 

When we use the terms “AXIM”, “Company”, “we”, “our” and “us” we mean Axim Biotechnologies, Inc., a Nevada corporation, and its consolidated subsidiaries, taken as a whole, as well as any predecessor entities, unless the context otherwise indicates.

 

FORWARD LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q, the other reports, statements, and information that the Company has previously filed with or furnished to, or that we may subsequently file with or furnish to, the SEC and public announcements that we have previously made or may subsequently make include, may include, or may incorporate by reference certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and that are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that Act. To the extent that any statements made in this report contain information that is not historical, these statements are essentially forward-looking. Forward-looking statements can be identified by the use of words such as “anticipate”, “estimate”, “plan”, “project”, “continuing”, “ongoing”, “expect”, “believe”, “intend”, “may”, “will”, “should”, “could”, and other words of similar meaning. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, marketability of our products; legal and regulatory risks associated with trading publicly; our ability to raise additional capital to finance our activities; the future trading of our common stock; our ability to operate as a public company; our ability to protect our proprietary information; general economic and business conditions; the volatility of our operating results and financial condition; our ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed from time to time in our filings with the SEC, or otherwise.

 

Information regarding market and industry statistics contained in this report is included based on information available to us that we believe is accurate. It is generally based on industry and other publications that are not produced for purposes of securities offerings or economic analysis. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. We do not undertake any obligation to publicly update any forward-looking statements. As a result, investors should not place undue reliance on these forward-looking statements.

 

Overview

 

Axim Biotechnologies, Inc., a Nevada corporation, was originally incorporated in the State of Nevada on November 18, 2010, under the name AXIM International, Inc. On July 24, 2014, we changed our name to AXIM Biotechnologies, Inc. to better reflect our business operations. Our principal corporate headquarters are located at 6191 Cornerstone Court, E., Suite 114, San Diego, CA 92121. Our website address is www.aximbiotech.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. The trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.

 

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Acquisition of Sapphire Biotech, Inc.

 

On March 17, 2020, the Company entered into a Share Exchange Agreement (“Agreement”) with Sapphire Biotech, Inc., a Delaware corporation (“Sapphire”) and all of the Sapphire stockholders (collectively, the “Sapphire Stockholders”). Following the closing of the transaction, Sapphire became a wholly owned subsidiary of AXIM.

 

Current Operations Following the Acquisition of Sapphire Biotech, Inc.

 

Oncology

 

We continue to advance our mission of improving global cancer care through the development of novel therapeutics for controlling metastatic cancer spread, and diagnostics for early cancer detection, response to treatment, and for monitoring post-treatment recurrence. We have made significant progress with the development of additional anologs of SBI-183 licensed from Mayo Clinic and Arizona State University.

 

We have been investigating the enzyme Quiescin Sulfhydryl Oxidase 1 (QSOX1), a master regulator of extracellular matrix remodeling, and its overexpression by tumor cells. Overexpression of QSOX1 has been unambiguously linked to promoting tumor invasion and metastasis. One of the Company’s co-founders, Dr. Douglas Lake, has discovered that a small molecule SBI-183 inhibited the enzymatic activity of QSOX1 and as a result suppressed tumor cell invasion in vitro and metastasis of breast tumor cells in vivo. Through its medicinal chemistry efforts the Company synthesized multiple structural analogs of SBI-183 and unveiled SPX-1009 lead compound that demonstrated ten-fold improvement in suppressing invasion and metastasis in several cancer models.

 

The Company believes that its therapeutic drug development strategy targeting the metastatic spread is a unique, novel and pioneering approach to saving lives. The near-term objective of the Company is to demonstrate the ability of its lead anti-QSOX1 drug candidates to suppress tumor growth and metastasis and to advance them into pre-clinical studies.

 

Additionally, the Company believes that QSOX1 has a significant potential to be developed into an important biomarker for liquid biopsy cancer test. The Company anticipates that ongoing diagnostic product development in 2020 will result in a commercial prototype in early 2021 of a universal companion diagnostic to measure the efficacy of any ongoing cancer treatments based on measuring QSOX1 levels. Ultimately, the Company aims to develop a blood test that makes possible the early detection of cancer.

 

Covid-19

 

With the onset of the COVID-19 pandemic, we began creating COVID-19 rapid diagnostic tools, including multiple first-in-class COVID-19 neutralizing antibody tests and other innovations. AXIM’s rapid diagnostic test for detecting neutralizing antibodies is the first of its kind. The test has the ability to deliver results in under 10 minutes and can detect the level of neutralizing antibodies an individual has. We have designed this test to be used at point-of-care facilities to measure levels of neutralizing antibodies in convalescent plasma so that plasma with the highest levels of neutralizing antibodies can be identified and administered to patients fighting COVID-19. Without this knowledge, many patients could be undertreated with non-neutralizing plasma and may not benefit from this treatment. Another application of our point-of-care test is to help ensure that vaccines and monoclonal antibody drugs elicit high levels of neutralizing antibodies. When a vaccine is available, manufacturers can employ AXIM’s rapid point-of-care test to evaluate protective immune responses in vaccine recipients.

 

Our high throughput rapid neutralizing antibody test, NeuCovix-HT™, was designed to solve a major issue that COVID-19 researchers are currently facing. NeuCovix-HT™ solves the problem of vaccine and monoclonal antibody drug manufacturers’ requirement in Phase 3 clinical trials to measure neutralizing antibody levels longitudinally in large groups of volunteer recipients using expensive and laborious virus-based assays. Clinical centers participating in the vaccine trials could employ NeuCovix-HT™ tests to measure neutralizing antibodies from vaccine recipients in thousands of plasma samples per day and be able to test all recipient’s multiple times.

 

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As more of the population recovers from COVID-19, we believe NeuCovix-HT™ will benefit clinical laboratories running batches of thousands of tests per week to measure levels of neutralizing antibodies in COVID-19 convalescent plasma. NeuCovix-HT™ distinguishes which convalescent plasmas contain low and high levels of neutralizing antibodies so that patients fighting COVID-19 can be treated with plasma from donors with the highest levels of neutralizing antibodies. We are in the process of sourcing materials and optimizing the test and expect to finish in the first quarter of 2021.

 

As our scientific team was hard at work developing our COVID-19 rapid diagnostic tests and virus-capturing face mask, we were frustrated by the delays and costs caused by lack of supply of a recombinant virus binding protein (VBP) for SARS-CoV-2 that was essential to our testing. To continue our projects as planned and decrease overall costs, AXIM’s talented team decided to make its own VBP that is even more potent than current outsourced options. AXIM’s laboratory tests have proven the RBD spike protein binds with our novel VBP. Initial tests also show that our novel VBP is approximately 10 times more potent and stable than current VBP options on the market. This now in-house development of the core ingredients needed to manufacture strips and masks could potentially derive additional revenue and allows us to control our supply chain. We have already manufactured enough VBP for millions of rapid diagnostic tests.

 

In August, we signed an exclusive licensing, manufacturing and distribution agreement with Empowered Diagnostics LLC to execute the high volume production of our rapid point-of-care diagnostic test. AXIM and Empowered have completed the technology transfer and Empowered Diagnostics has built out their production facility to be able to manufacture millions of our tests per month. As what we believe to be the last step for the EUA application already filed with the FDA for our plasma test we will be conducting a live virus comparison study on 30 plasma samples at a Biosafety Level 3 (BSL3) laboratory. As soon as this comparison study is finished, we will amend the EUA and we expect to begin sales and manufacturing immediately and we expect to see significant revenue shortly thereafter.

 

We have also received Institutional Review Board approval to begin a clinical study at Arizona State University with our point-of-care whole blood test as the last step in what will be another EUA application. We hope to be the first FDA-approved rapid point-of-care test for neutralizing antibodies.

 

Milestones 2020 to Date

 

On January 13, 2020, Sapphire Biotech enters into an agreement with Skysong Innovations, LLC for an exclusive license to technology relating to SBI-183, an anti-metastatic compound suppressing tumor cell growth and blocking metastasis (and grants equity to Mayo Clinic Ventures and Arizona State University).

 

On February 6, 2020, Sapphire Biotech signs Sponsored Research Agreement (SRA) with Arizona State University to conduct in vitro testing and in vivo pre-clinical animal studies re cancer inhibitory agents that will prevent metastases.

 

On March 18, 2020, Axim Biotechnologies announces the acquisition of Sapphire Biotech.

 

On March 24, 2020, Sapphire announces the completion of in-vitro studieson the new compound, SPX-1009 proving ten-fold greater inhibition of tumor metastasis than parent compound SBI-183 following testing of over 80 analogs.

 

On March 27, 2020, Sapphire Biotech signs an agreement with TD2 to initiate animal studies to evaluate the efficacy of SPX-1009 as an anti-metastatic treatment and to measure levels of QSOX1 as a potential companion diagnostic test.

 

On July 15, 2020, AXIM announced the development of a rapid diagnostic test measuring levels of functional neutralizing antibodies that are believed to prevent SARS-CoV-2 from entering the host cells. Unlike currently available serological COVID-19 tests that detect an antibody response to the virus, AXIM’s rapid 10-minute test measures a specific subpopulation of antibodies to block binding of the virus to host cell receptors. While there are expensive, time consuming laboratory tests that measure neutralizing antibodies, AXIM’s test differs in that it is a portable, low cost, rapid point-of-care test with results in 10 minutes. Status: Ongoing

 

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On August 5, 2020, announced today the development, patent filing and Emergency Use Approval (EUA) filing of NeuCovix-HT™, a high throughput (HT) patent-pending diagnostic test that measures levels of functional antibodies in plasma or serum that neutralize SARS-CoV-2, the virus that causes COVID-19. Unlike current serology tests for COVID-19 that qualitatively detect antibodies to the virus, NeuCovix-HT™ quantitatively measures functional antibodies that block binding of the virus to host cell receptors. Status: Ongoing

 

On August 11, 2020, Sapphire was awarded a $395,880 phase I Small Business Innovation Research (SBIR) grant by the National Cancer Institute (NCI). The grant will support the continued development of novel small molecules that inhibit the enzymatic activity of Quiescin Sulfhydryl Oxidase I (“QSOX1”) based on a lead compound. QSOX1 is a tumor-derived enzyme that is important for cancer growth, invasion and metastasis. Status: Ongoing

 

On August 24, 2020, Axim signed an exclusive limited licensing, manufacturing and distribution agreement with Empowered Diagnostics LLC (“Empowered Diagnostics”) for high volume production of AXIM’s rapid diagnostic test measuring levels of functional neutralizing antibodies that are believed to prevent SARS-CoV-2 from entering the host cells. Status: Ongoing

 

On September 16, 2020, re filed the Emergency Use Authorization (EUA) application with the Food and Drug Administration (FDA) for measuring COVID-19 neutralizing antibodies in plasma and serum through its first-in-class rapid diagnostic test. Status: Ongoing

 

On September 22, 2020, Axim announced that the United States Patent and Trademark Office (USPTO) has issued the Company a new Notice of Allowance for a patent (Application No. 15/748,784) on anti-neoplastic compounds and methods targeting Quiescin Sulfhydryl Oxidase 1 (QSOX1), an enzyme important for tumor cell growth, invasion and metastasis.

 

On September 29, 2020, Axim announced that it has filed a provisional patent for a first-in-class face mask that captures and deactivates SARS-CoV-2, the coronavirus responsible for the ongoing COVID-19 pandemic. Status: Ongoing

 

On September 30, 2020, Axim announced today that it has filed a provisional patent for a recombinant virus binding protein (VBP) for SARS-CoV-2, the coronavirus responsible for the current COVID-19 pandemic, and is now manufacturing the VBP. The Company no longer needs to rely on outside protein supply to continue our research and can greatly cut down on our manufacturing costs.

 

On December 3, 2020, we announced the development and patent filing for an enzyme-linked immunosorbent assay (“ELISA”)-based diagnostic test for the detection of SARS-CoV-2 neutralizing antibodies. Status: Ongoing

 

On February 3, 2021, we announced the initiation of clinical trials for ImmunoPass, our rapid point-of-care test that semi-quantitatively measures levels of neutralizing antibodies to COVID-19. Status: Ongoing

 

On March 8, 2021, we announced that we had successfully completed point-of-care clinical trials on our much awaited ImmunoPass rapid test that semi-quantitatively measures levels of COVID-19 neutralizing antibodies to help understand COVID-19 immunity, validate vaccine’s effectiveness and estimate how long the vaccine will be effective in patients.

 

On March 24, 2021, the Company, through Empowered Diagnostics, filed an EAU application with the FDA for measuring COVID-19 neutralizing antibodies in whole blood for a Point-of-Care rapid diagnostic test. Status: Ongoing

 

Anticipated Expenses

 

During the next twelve months we anticipate incurring costs related to: (i) filing Exchange Act reports, (ii) contractual obligations, (iii) clinical trials, and (iv) continued research and development.

 

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Intellectual Property

 

I. QSOX1-RELATED INVENTIONS.  

 

QSOX1 (Quiescin Sulfhydryl Oxidase 1) is an enzyme that is over-expressed in multiple tumor types. Genetically silencing QSOX1 in tumors slows their growth, migration, invasion and metastasis. Based on these findings, the inventors of the inventions described below tested libraries of chemical compounds for the ability to inhibit QSOX1. Several inhibitors of the QSOX1 enzyme were identified. Initially, SBI-183 was identified and animal studies confirmed its ability to suppress tumor growth. The inventors subsequently developed an entire library of analogs of the parent compound, SBI-183, detailed in several inventions below to identify compounds with greater inhibitory activity. These compounds have the potential to be developed into therapeutic treatments for metastasis and to be used in conjunction with other neoplastic treatments, such as chemotherapy.

 

Included in the group of QSOX1-related inventions below is the identification of a specific splice variant of QSOX1, identified as QSOX1-L, as a unique Biomarker for the detection of certain tumors overexpressing QSOX1. This biomarker formed the basis for the invention relating to a Rapid Diagnostic Test for certain cancers.

 

A. Anti-Neoplastic Compounds and Methods Targeting QSOX1  

 

1.US Provisional Patent Application No. 62/218.732 filed on September 15, 2015  

 

PCT Provisional Patent Application W02017048712A1

 

US Nonprovisional Application No. 15/748,784 filed on January 30, 2018

 

Notice of Patent Allowance dated September 17, 2020

 

Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1

 

Assignee: Mayo Clinic/Arizona State University

 

Exclusive Licensee: Axim Biotechnologies, Inc.

 

Compounds and methods involving inhibition of the enzymatic activity of QSOX1. The compounds and methods can be used in treatment of neoplastic cells to suppress tumor growth and invasion in a variety of cancers, including but not limited to myeloma and cancers of the breast, kidneyand pancreas. Claims include the compound SBI-183 as a neoplastic agent found to inhibit tumor growth, invasion and suppress metastasis of tumors by inactivating QSOX1.

 

2. US Provisional Patent Application No. 62/916,065 filed on October 16, 2019 

 

Title: Chemical Compounds that Inhibit QSOX1 for the Treatment of Cancer

 

Assignees: Arizona State University/Axim Biotechnologies, Inc.

 

Derivatives of the parent compound SBI-183 have been identified as inhibiting the enzymatic activity of QSOX1. These compounds can be used in treatment of neoplastic cells by suppressing tumor growth and invasion in a variety of cancers that overexpress QSOX1, including but not limited to myeloma and cancers of the breast, kidney and pancreas.

 

3. US Provisional Patent Application No. 62/916,067 filed October 16, 2019 

 

Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1

 

Assignees: Arizona State University/Axim Biotechnologies, Inc.

 

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Exclusive Licensee: Axim Biotechnologies, Inc.

 

Compounds that are structurally distinguishable from the compound, SBI-183 are SPX-013 and SPX-014, and have been identified as inhibiting the enzymatic activity of QSOX1. The compounds and methods can be used in treatment of neoplastic cells by suppressing tumor growth and invasion in a variety of cancers, including but not limited to myeloma and cancers of the breast, kidney and pancreas.

 

4.US Provisional Patent Application No. 62/944/283 filed December 5, 2019  

 

Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1

 

Assignees: Arizona State University/Sapphire Biotech, Inc.

 

Exclusive Licensee: Axim Biotechnologies, Inc.

 

Compounds that are structurally distinguishable from the SBI-183 have been identified as inhibiting the enzymatic activity of QSOX1. One in particular, SPX-1009, also inhibits tumor cell growth, migration and invasion in vitro and metastasis in a mouse model of triple negative breast cancer. This invention concerns analogs of this lead compound SPX-1009. In in vitro testing, the lead compound SPX-1009 and its analogs have been found to be more potent and to have improved pharmacodynamics in mouse models of cancer.

 

5.US Provisional Patent Application No. 62959752 filed January 10, 2020  

 

Title: Anti-Neoplastic Compounds and Methods Targeting QSOX1 and Inhibiting Cellular Responses to MET Receptor.

 

Assignee: Axim Biotechnologies, Inc.

 

Compounds and methods involving inhibition of the enzymatic activity of QSOX1 and methods of inhibiting cellular responses to the MET receptor signaling are disclosed which include administering any one or more compounds or pharmaceutical compositions. The compounds and methods can be used in treatment of neoplastic cells, for example, to suppress tumor growth and invasion in a variety of cancers, including but not limited to myeloma and cancers of the breast, kidney and pancreas. The uniqueness of the invention relates to the combined inhibition of QSOX1 and cellular responses to the MET receptor signaling.

 

B. Unique Biomarker QSOX1-L Identified and Rapid Diagnostic for Various Cancers  

 

1. US Provisional Patent Application No. 62/829,556 filed April 4, 2019;  

 

Utility Patent Application No. 16/841,521 filed April 6, 2020

 

International Patent Application No. PCT/US2020/026936 filed April 6, 2020

 

Title: Systems and Methods for Rapid Diagnostic for Various Cancers

 

Assignee: Axim Biotechnologies, Inc.

 

QSOX1-L, a splice variant of QSOX1, has been identified as a novel biomarker of bladder cancer and possibly other cancers in serum. Proprietary antibodies have been generated that selectively detect only this variant and not others. QSOX1-L has been used to develop a rapid and cost-effective diagnostic test for bladder and possibly other urologic cancers from urine.

 

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II. SARS-CoV-2-RELATED INVENTIONS 

 

A. Rapid Diagnostic Test to Measure Levels of Neutralizing Antibodies to SARS-CoV2 

 

1. US Provisional Application No. 63/023,646 filed May 12, 2020 

 

Title: Convalescent Plasma Testing and Treatment

 

Assignee: Axim Biotechnologies, Inc. (Axim) and Arizona State University (ASU)

 

Exclusive Licensee: Axim Biotechnologies, Inc. (ASU’s Interest) Exclusive Licensee: Empowered Diagnostics, Inc. (Axim’s Interest)

 

The invention refers to a Rapid Test to measure levels of Neutralizing Antibodies to SARS-CoV2. Unlike currently available serological COVID-19 tests that detect an antibody response to the virus, the rapid 10-minute test measures a specific subpopulation of antibodies that block binding of the virus to host cell receptors. In contrast to current tests using live viruses which are time-consuming, expensive and require trained personnel in a tightly controlled laboratory setting to measure neutralizing antibodies, the rapid test is a portable, low cost, rapid point- of-care test that measures levels of neutralizing antibodies in 10 minutes.

 

2. US Provisional Application No. 63/144,454 Filed February 1, 2021; US Provisional Application No. 63/152,774 Filed February 23, 2021 

 

Title: Rapid LFA Diagnostic Test to Measure Levels of Neutralizing Antibodies to SARS- CoV-2 from Whole Blood

 

Assignee: Axim Biotechnologies, Inc.

 

Exclusive Licensee: Empowered Diagnostics, Inc.

 

The invention methods and test kits can be used with any sample in which the presence, absence and/or quantity of neutralizing antibodies (nAbs) to SARS-CoV-2 is desired to be determined, such as for example, serum, plasma, whole blood, saliva, mucous, and other biological fluids. In a particular embodiment, the invention methods and/or kits are used with whole blood.

 

B. AlphaLisa Assay for High Throughput Detection of Neutralizing Antibodies to SARS-CoV2  

 

1. US Provisional Application No. 63/060,635 filed August 3, 2020; US Provisional Application No. 63/061,112 filed August 4, 2020 

 

Title: NeuCovix-HT AlphaLisa assay for high throughput detection of Neutralizing Antibodies to SARS-CoV-2

 

Assignee: Axim Biotechnologies, Inc. and Arizona State University (ASU)

 

Exclusive Licensee: Axim Biotechnologies, Inc. (ASU’s Interest)

 

The invention refers to an AlphaLisa assay for high throughput (HT) detection of Neutralizing antibodies to SARS-CoV-2. Included in the claims is the HT diagnostic test that measures levels of functional antibodies in plasma or serum that neutralize SARS- CoV-2, the virus that causes COVID19. Unlike current serology tests for COVID 19 that qualitatively detect antibodies to the virus, the HT test quantitatively measures functional antibodies that block binding of the virus to host cell receptors.

 

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C. Direct Competitive ELISA for the Detection of SARS-Cov2 Neutralizing Antibodies 

 

1. US Provisional Application No. 63/152,807 filed February 23, 2021 

 

Title: Direct Competitive ELISA for the Detection of SARS-CoV2 Neutralizing Antibodies

 

Assignee: Axim Biotechnologies, Inc.

 

The invention relates to a method for rapid detection of SARS-CoV2 Neutralizing Antibodies in one of the following test samples: human or animal serum, plasma, saliva, tear, sweat, exhaled breath condensate. The test sample is mixed with an ACE2 label detection reagent. The sample mixture is incubated, and the quantity of ACE2 label detection reagent bound to the RBD molecules indicates the quantity of SARs-Co2 Neutralizing Antibodies.

 

D.ACE2 Variants 

 

1. US Provisional Application No. 63/081,811 filed September 22, 2020 

 

Title: Super-ACE2 Variants

 

Assignee: Axim Biotechnologies, Inc.

 

The invention relates to a new variant recombinant protein of ACE2 identified as ACE2-614-Fc (“Super ACE2”), that is more potent and has a longer shelf life and is more stable than wild type ACE2. Super ACE2 variant can be used in a variety of ways as follows:

 

1)Development of competitive assays for neutralizing antibodies that disrupt RBD- ACE2 interaction.  

 

2)Direct assays for virus spike antigens. Super ACE2 acts as a very specific antibody to capture Spike proteins through the RBD domain. 

 

3)Cardio-vascular, blood-pressure and related disorders therapeutic and diagnostic. 

 

4)Anything related to the virus capture such as (i) Mask treatments, (ii) Aerosols, (iii) Sprays and drops, (iv) Ointment and dermal applications, (v) Surfaces 

 

E. Facemask Having Enhanced Infectious Agent Capturing and Related Methods  

 

1. US Provisional Application No. 63/066,104 filed August 14, 2020 

 

Title: Facemask Having Enhanced Infectious Agent Capturing and Related Methods

 

Assignee: Axim Biotechnologies, Inc.

 

The invention is a facemask with a filtration material and an infectious agent capture-moiety. Infectious agent capture-moiety refers to any compound or biomolecule that can bind to any infectious agent. The filtration material acts as a scaffold to either directly block or impede the flow-through of the infectious agent or to support the infectious agent capture moiety. The infectious agent capture- moiety then functions to directly block or impede the flow-through of an infectious agent. The infectious agent-capture moiety can aerosolized and sprayed or applied onto pre-treated filtration material and can be specific to capture infectious agents, such as SARS-CoV-2. In such embodiments, the facemasks is capable of providing enhanced protection for the user and to others from SARS-Co

 

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III. CANNABINOIDS 

 

A. Polyfunctional Cannabinoids  

 

1. US Provisional Patent Application No 3/014,471 filed April 23, 2020 

 

Title: Polyfunctional Cannabinoids

 

Assignee: Axim Biotechnologies, Inc.

 

The invention relates to cannabinoid constructs that may produce more potent response than individual cannabinoid molecules with the additional benefit of being more water- soluble and bioavailable.

 

Trade Secrets

 

We rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these procedures, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors, or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

 

Market, Customers and Distribution Methods

 

Our focus is on the development of innovative diagnostic and pharmaceutical products focusing on diseases and conditions for which currently there are no known efficient therapeutic ingredients or delivery systems. We plan to be an active player in this field of biosciences with our extensive R&D and pipeline of innovative products.

 

In August, we signed an exclusive licensing, manufacturing, and distribution agreement with Empowered Diagnostics LLC to execute the high-volume production of our rapid point-of-care diagnostic test. AXIM and Empowered have completed the technology transfer and Empowered Diagnostics have built out their production facility to be able to manufacture millions of our neutralizing antibody tests for Covid-19 per month.

 

Competition

 

The biotech industries are characterized by rapidly advancing technologies, intense competition, a strong emphasis on proprietary products and intellectual property. While we believe that our scientific knowledge, technology, and development experience provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions, some or all of which may have greater access to capital or resources than we do. For any products that we may ultimately commercialize, not only will we compete with any existing diagnostic tests and therapies and those products currently in development, but we will also have to compete with new technologies that may become available in the future.

 

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We expect that the market will become increasingly competitive in the future. Many of our competitors, either alone or together with their collaborative partners, operate much larger research and development programs, and have substantially greater commercial and financial resources than we do, as well as significantly greater experience in: developing product candidates and technologies, undertaking preclinical studies and clinical trials, obtaining FDA and other regulatory approvals of product candidates, formulating and manufacturing diagnostic products and drug candidates and launching, marketing and selling these candidates. As a result, these companies may obtain marketing approval more rapidly than we are able and may be more effective in developing, selling, and marketing their products.

 

Source and Availability of Raw Materials

 

As our scientific team was developing our COVID-19 rapid diagnostic tests and virus-capturing face mask, we were frustrated by the delays and costs caused by lack of supply of a recombinant virus binding protein (VBP) for SARS-CoV-2 that was essential to our testing. To continue our projects as planned and decrease overall costs, AXIM’s team decided to make its own VBP. This now in-house development of the core ingredients needed to manufacture our products allows us to control our supply chain.

 

Government Regulation

 

On July 15, 2020, we announced the submission of an Emergency Use Authorization (“EUA”) to the FDA for our rapid diagnostic test kit for the independent detection of neutralizing antibodies in sera of patients who had been exposed to the SARS-CoV-2 virus.

 

On August 5, 2020, announced the development, patent filing and Emergency Use Approval (EUA) filing of NeuCovix-HT™, a high throughput (HT) patent-pending diagnostic test that measures levels of functional antibodies in plasma or serum that neutralize SARS-CoV-2, the virus that causes COVID-19. Unlike current serology tests for COVID-19 that qualitatively detect antibodies to the virus, NeuCovix-HT™ quantitatively measures functional antibodies that block binding of the virus to host cell receptors.

 

An EUA would allow us to market and sell the test without the need to pursue the lengthy and expensive drug approval process. The FDA may issue an EUA during a public health emergency if it determines that the potential benefits of a product outweigh the potential risks and if other regulatory criteria are met. If an EUA is granted for the test, we will rely on the FDA policies and guidance in connection with the marketing and sale of the test. If these policies and guidance change unexpectedly and/or materially or if we misinterpret them, potential sales of the test could be adversely impacted. In addition, the FDA may revoke an EUA where it is determined that the underlying health emergency no longer exists or warrants such authorization. If granted, we cannot predict how long an EUA for the test will remain in place. The termination of an EUA for the test, if granted, could adversely impact our business, financial condition, and results of operations.

 

We may also seek additional EUAs from the FDA for our other product candidates for the detection and/or treatment of COVID-19 and the SARS-CoV-2 virus. If granted, the additional EUAs would allow us to market and sell additional product candidates without the need to pursue the lengthy and expensive drug approval process. There is no guarantee that we will be able to obtain any additional EUAs. Failure to obtain additional EUAs or the termination of such EUAs, if obtained, could adversely impact our business, financial condition, and results of operations. 

 

Employees

 

As of August 22, 2021, we have 4 full-time employees and 1 part-time employee. We allow and utilize the services of independent contractors. We will be considering the conversion of some of our part-time employees to full-time positions. We are currently in discussions with qualified individuals to engage them for positions in sales and marketing, research and development, and operations. Management believes the Company has good relationships with its employees.

 

Costs and effects of compliance with environmental laws

 

The expense of complying with environmental regulations is of minimal consequence.

 

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Results of Operations

 

The following discussion of our financial condition and results of operations for the period ended June 30,2021 should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate”, “estimate”, “plan”, “project”, “continuing”, “ongoing”, “expect”, “believe”, “intend”, “may”, “will”, “should”, “could”, and similar expressions to identify forward-looking statements.

 

Comparison of the six months and three months ended June 30, 2021 to June 30, 2020.

 

For the six months periods ended June 30, 2021 and 2020, our revenues from continuing operations totaled $47,524 and $-0-, respectively, our revenues from discontinued operations totaled $-0- and $7,990, respectively.

 

   

Six months

Period Ended

30-Jun-21

 

Six months

Period Ended

30-Jun-20

  $ Change   % Change
                 
Research and development   $ 149,019     $ 126,292     $ 22,727       18.00 %
Depreciation     13,184       5,124       8,060       157.30 %
Advertising and promotions     673,283       362,487       310,796       85.74 %
Travel and entertainment expenses     29,032       14,349       14,683       102.33 %
Office/Other expenses     69,142       73,698       (4,556 )     -6.12 %
Impairment and amortization     641,142       6,763       634,379       9379.46 %
Licenses and permits     19,473       54,271       (34,798 )     -64.12 %
Legal and other fees     178,404       221,882       (43,478 )     -19.60 %
Offices salary and wages     503,335       294,399       208,936       70.97 %
Consulting fees     440,865       33,000       407,865       1235.95 %
Compensation costs     191,266       8,200       183,066       2232.51 %
Audit fees     96,171       81,703       14,468       17.71 %
Filing fees     5,619       4,898       721       14.72 %
Insurance expense     46,627       62,166       (15,539 )     -25.00 %
Directors fees     40,000       40,000       —         0.00 %
Total Operating expenses from continuing operations   $ 3,096,562     $ 1,389,232     $ 1,707,330       122.90 %

 

Our operating expenses from continuing operations for the six months periods ended June 30, 2021 and 2020, were $3,096,562 and $1,389,232, respectively. Our operating expenses from discontinued operations for the six months periods ended June 30, 2021 and 2020, were $4,633 and $357,430, respectively. The Company incurred $440,865 and $33,000 of Consulting fees included in above table is the largest changes are Impairment and Amortization of Other Assets of $641,142 this include the three months of amortization of intangible asset and $325,115 is because of the increase in Meeting and Conference during the six months ended June 30, 2021 and 2020, respectively.

 

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For the three months periods ended June 30, 2021 and 2020, our revenues from continuing operations totaled $14,875 and $-0-, respectively, our revenues from discontinued operations totaled $-0- and $849, respectively.

 

   

Three months

Period Ended

30-Jun-21

 

Three months

Period Ended

30-Jun-20

  $ Change   % Change
                 
Research and development   $ 48,066     $ 121,437     $ (73,371 )     -60.42 %
Depreciation     6,834       4,285       2,549       59.49 %
Advertising and promotions     564,296       42,476       521,820       1228.51 %
Travel and entertainment expenses     21,153       1,303       19,850       1523.41 %
Office/Other expenses     37,094       30,348       6,746       22.23 %
Impairment and amortization     641,096       3,125       637,971       20415.07 %
Licenses and permits     2,622       1,270       1,352       106.46 %
Legal and other fees     87,759       134,014       (46,255 )     -34.51 %
Offices salary and wages